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1.  Norton  on  Bills  and  Notes.      {3d Edition.) 

2.  Clark's   Criminal  Law.      (2d  Edition. ) 

3.  Shipman's  Cofmnon-Law  Pleading.      (2d  Edition.  ) 

4.  Clark  on   Contracts.      (2d  Edition  ) 

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22.  McKelvey  on  Evidence.      (2d  Edition. ) 

23.  Barrows  on  Negligence. 

24.  Hughes  on  Admiralty. 

25.  Eaton  on  Equity. 

26.  Tiffany  on  Principal  and  Agent. 

27.  Gardner  on   Wills. 

28.  Vance  on  Insurance. 

29.  Ingersoll  ofi  Public   Corporations. 

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HAND-BOOK 


LAW  OF  BILLS  AND  NOTES 


By  CHARLES  P.  NORTON 

Lecturer  on  Bills  and  Notes  in  the  Buffalo  Law  School 


THIRD  EDITION 

WITH  AN  APPENDIX  CONTAINING  THE   NEGOTIABLE 

INSTRUMENTS  LAW 

By  FRANCIS  B.  TIFFANY 


St.  Paul,  Minn. 

WEST  PUBLISHING  CO. 

1900 


Copyright,  1898, 

BT 

WEST  PUBLISHING  COMPANY. 


Copyright,  W^5, 

BT 

WEST  PUBLISHING  COMPANY. 


Copyright,  1900, 

BT 

WEST  PUBLISHING  COMPANY. 


I 

\9oo 


PREFACE  TO  THIRD  EDITION. 


In  preparing  a  new  edition  of  Mr.  Norton's  book,  it  has  been  deemed 
advisable  to  print  as  an  appendix  the  Negotiable  Instruments  Law, 
which  has  already  been  adopted  in  fifteen  states,  as  well  as  in  the  Dis- 
trict of  Columbia.  It  is  obvious  that  even  an  elementary  book  upon 
Bills  and  Notes  must  contain  references  to  this  law,  which,  while  it 
is,  in  the  main,  declaratory  in  its  effect,  settles  some  doubtful  points, 
and  necessarily  changes  rules  in  many  jurisdictions  upon  points  con- 
cerning which  a  conflict  of  laws  existed.  The  text  of  the  law  as  print- 
ed in  the  appendix  is  that  of  the  New  York  act,  such  few  modifications 
as  have  been  made  by  the  various  states  being  mentioned  in  the  notes. 
The  law  is  also  valuable  to  the  student,  even  in  states  which  have 
not  adopted  it,  as  furnishing  a  concise  statement  of  rules,  which  for 
the  most  part  are  of  universal  application;  and  for  this  reason  the 
editor  has  throughout  the  book,  in  the  footnotes,  inserted  references 
to  the  appropriate  sections  of  the  law,  at  the  same  time  pointing  out 
any  changes  effected  by  them.  Much  new  matter  has  been  incorpo- 
rated, and  this  has  necessitated  some  alteration  of  the  former  text. 

At  the  suggestion  of  many  teachers,  the  publishers  have  adopted 
the  device  of  printing  in  bold  type  in  the  footnotes  and  text  the  names 
of  all  cases  there  cited  which  are  to  be  found  in  certain  of  the  collec- 
tions of  leading  and  illustrative  cases  on  Bills  and  Notes  in  use  in  the 
law  schools.  The  cases  so  printed  are  to  be  found  in  Ames'  Cases  on 
the  Law  of  Bills  and  Notes,  Huffcut's  Negotiable  Instruments,  and 
Johnson's  Elements  of  the  Law  of  Negotiable  Contracts  (second  edi- 
tion). 

The  present  editor  wishes  to  express  his  great  obligation  to  Prof. 
Ames,  whose  Index  and  Summary  at  the  end  of  the  cases,  unquestion- 
ably the  most  important  contribution  to  the  subject  that  has  been 
made  in  America,  he  has  constantly  consulted;  and  to  Prof.  Huffcut, 
whose  Negotiable  Instruments  is  an  invaluable  commentary  upon  the 
Negotiable  Instruments  Law.  F.  B.  T. 

St.  Paul,  August  31,  1900. 

(v)» 


TABLE  OF   CONTENTS. 


CHAPTER  I. 

OF  NEGOTIABILITY  SO  FAR  AS  IT  RELATES  TO  BILLS  AND  NOTES. 

Section  Page 

1.     Origin  of  Negotiability 1-8 

2-7.     Distinction  between  Assignability  and  Negotiability 9-14 

8-9.     Indicia  of  Negotiability 14-17 

10.  Purpose  of  Negotiability 17-18 

11.  Payment  by  Negotiable  Instrument 19-21 

CHAPTER  n. 

OF  NEGOTIABLE  BILLS  AND  NOTES,  AND  THEIR  FORMAL  AND 
ESSENTIAL   REQUISITES. 

12.  Definition  and  Forms  of  Bills  of  Exchange 22-25 

13.  Definition  and  Form  of  Note 25-26 

14.  Essentials  of  Bill  or  Note 26 

15.  Order  Contained  in  Bill 27-29 

16.  Promise  Contained  in  Note 29-31 

17-20.     Certainty  as  to  the  Terms  of  the  Order  or  Promise 31-42 

21-25.     Payment  of  Money  Only 42-53 

26-30.     Specification  of  Parties 54-63 

31-33.     Capacity  of  Parties 63-65 

34.     Authority  of  Agent 65-66 

36-37.     Delivery  of  Instruments 67-71 

38.  Date    72-73 

39.  Value   Received 73-75 

40.  Days  of  Grace 75-77 

CHAPTER  m. 

ACCEPTANCE   OF   BILLS   OF   EXCHANGE. 

41.  Definition   78-81 

42-45.     Acceptance  According  to  Tenor 82-85 

46.     Who  may  Accept 86-88 

NEG.BILLS  (vll) 


Vlll  TABLE    OF    CONTENTS. 

Section  Page 

47.     Delivery    88-89 

48-49.     Forms  and  Varieties  of  Acceptance 89-93 

50.  Imi)lied    Acceptance 93-95 

51-52.  Acceptance  on  Separate  Paper 95-99 

53.     Parol  Acceptance  of  a  Bill 99-101 

54-.54a.  Acceptance  for  Honor  or  Supra  Protest 101-103 

55.     Time  Allowed  for  Acceptance 103-104 


CHAPTER  IV. 

INDORSEMENT. 

56.  Definition    105 

57.  Formal    Requisites 105-110 

58-59.  Indorsement  in  Blank 110-115 

60-Gl.  Special    Indorsement 11&-119 

62-64.  Indorsement  without  Recourse,   Conditional  and  Restrictive 

Indorsement    119-127 

65.  Nature  of  Indorsement 128-131 

66.  Requisites  of  Indorsement 131-137 

67-68.     Irregular    Indorsements 13S-143 

CHAPTER  V. 

OF  THE  NATURE  OF  THE  LIABILITIES  OP   THE   PARTIES. 

69.  Acceptor  and  Maimer 144^145 

70.  Facts  which  the  Acceptor  Admits 146-150 

71.  Facts  which  the  Acceptor  does  not  Admit 151-152 

72-73.     Acceptor   Supra  Protest 152-156 

74-76.     Drawer  and  Indorser 156-159 

77.  Undertaking  of  Drawer 159-162 

78.  Warranties  of  Indorser 162-166 

79.  Warranties  of  Indorser  without  Recourse — Of  Transferror  by 

Delivery   167-170 

SO.     Damages  against  the  Acceptor,  Maker,  Drawer,  and  Indors- 

ers  upon  the  Bill  or  Note  and  upon  the  Wari'anties 170-176 

81-83.     Accommodation  Parties  and  Persons  Accommodated 176-183 

83a-83b.  Conflict  of  Laws 183-190 


TABLE    OF    CONTENTS. 


CHAPTER  VI. 

TRANSFER. 

Section  Page 

84.  Definition 191-192 

85.  "Validity  between  Immediate  Parties 192-195 

86.  Metliods   of   Transfer 196 

87.  By   Assignment 196-198 

88.  By  Operation  of  Law 198-200 

88a-89.  By    Negotiation 200 

90-90a.  Negotiation   by   Indorsement 200-204 

91.  By   Delivery 204-206 

92.  Overdue  Paper 207-212 

92a.  Riglit  to  Sue 212-215 


CHAPTER  Vn. 

DEFENSES  COMMONLY   INTERPOSED   AGAINST   A   PURCHASER   FOR 
VALUE  WITHOUT   NOTICE. 

93.     Real  and  Personal  Defenses 216-218 

94-107.  Real    Defenses 218-260 

108-121.  Personal  Defenses 260-308 


CHAPTER  VIII. 

PURCHASER  FOR  VALUE  WITHOUT  NOTICE. 

122.  What    Constitutes 309-310 

123-124.  Value    310-317 

125-127.  Notice    317-326 

128-131.  Presumption  and  Burden  of  Proof— Order  of  Proof 327-335 


CHAPTER  IX. 

PRESENTMENT   AND   NOTICE   OF   DISHONOR, 

132.     In    General 336-337 

133-140.     Presentment    337-359 

141-144.            By  Whom  and  to  Whom  Made— Effect  of  Failure  to  Pre- 
sent and  Protest 300-371 

14.5-146.     Notice  of  Dishonor 372-3'.)3 

147-147b.  Excuses  for  Failure  to  Present  or  Give  Notice 394—103 


X  TABLE    OF    CONTENTS. 

CHAPTER   X. 

CUECKS. 

Section  PaK« 

148-150.     In    General - 404-408 

151.     Checks  ns  Negotiable  Instruments 408-411 

152-154.     Presentment  and  Notice  of  Dishonor— Effect  of  Delay 412-417 

155.     Rights  of  Holder  against  Bank 418-410 

15G-150.     Certification  and  Acceptance  of  Checks 419-427 

IGO.     Failure  of  Bank  to  Honor  Check 427^29 


APPENDIX. 

NEGOTIABLE  INSTRUMENTS  LAW. 
(Pages  431-489.) 

t 


^. 


HAND-BOOK 


or 


NEGOTIABLE  BILLS  AND  NOTES 

THIRD  EDITIONT. 


CHAPTER  I. 

OF  NEGOTIABILITY  SO  FAR  AS  IT  RELATES  TO  BII-LS  AND  NOTES. 

L  Origin  of  Negotiability. 

2-7.  Distinction  between  Assignability  and  Negotiability; 

8-9.  Indicia  of  Negotiability. 

10.  Purpose   of   Negotiability. 

11.  Payment  by  Ne.-^otiable  Instrument, 

ORIGIN  OF  NEGOTIABILITY. 

1.  The  negotiability  of  bills  of  exchange  and  promissory 
notes  originated  in  the  custom  of  merchants.  The  statute 
of  Anne,  -which  is  declaratory  of  the  common  law,  estab- 
lished the  negotiability  of  promissory  notes. 

The  Ir.w,  looking  at  bills  of  exchange  and  promissory  notes  as  a 
circulating  medium,  divides  them  into  two  classes — negotiable  in- 
Btniments  and  non-negotiable  instruments.  Kegotiabilitj  is  not 
necessary  to  the  fonn  or  substance  of  a  promissory  note  or  bill 
of    exchange.*     Kon-negotiable    instruments    are    little    more    than 

»  Michigan   Ins.   Bank  v.   Eldred.  9  Wall.  544;    Wells   v.   Brlgham.   6  Gush. 
6;    DOWNING  v.  BACKEN.S'l  ( Ji:S,  3  Gaines  (N.  Y.)  137;    PRESIDENT.  ETC.. 
OF  TURNPIKE   ROAD   T.   HURTIN,   8  JoLns.    (N.    Y.)   217;    KIMBALL   ▼. 
NKG.  BILLS.— 1 


2  NEGOTIABILITY  SO  FAR  AS  IT  RKLATliS  TO  BILLS  AND  NOTES.       (Ch.    1 

evidences  of  indebtedness.  In  their  transfer,  tlie  law  treats  them  in 
most  respects  as  ordinary  choses  in  action,  and  subject  to  the  general 
rules  touching  assignments.  For  negotiable  instruments,  on  the 
other  hand,  in  their  most  common  form  of  bills  and  notes,  the  law  has 
endeavored  to  construct  a  system  of  rules  which  shall  protect  persons 
who  take  them  as  a  circulating  medium,  and  which  it  is  the  purpose  of 
this  treatise  to  point  out.* 

Custom  of  Merchants — Law  Merchant. 

While  the  historical  source  of  the  negotiability  of  both  bills  of 
exchange  and  promissory  notes  is  the  custom  of  merchants,  which  in 
time  came  to  be  recognized  and  enforced  by  the  courts,  the  negotia- 
bility of  promissory  notes  was  not  set  upon  a  firm  basis  until  it  had 
obtained  the  sanction  of  parliament.  Notes  were  first  recognized  by 
the  courts,  and  then  refused  recognition.  Their  negotiability  was 
established  in  1705  by  the  statute  of  3  &  4  Anne,  c.  9,  §§  1-3. 

The  custom  of  merchants  means  a  body  of  usages  and  rules  relating 
to  trade,  which  grew  up  among  merchants,  and  were  adopted  into  the 
law  by  the  courts.  In  English  law  it  is  as  old  as  Magna  Charta,  and 
it  is  recognized  in  the  statutes  of  the  Plantagenets  and  the  Tudors,' 
though  its  substantial  adoption  into  the  law  took  place  much  later. 
Originally  it  distinguished  the  contracts  of  foreign  merchants  from  the 
contracts  of  ordinary  individuals,  construing  them  not  according  to  the 
principles  of  the  common  law,  but  according  to  the  usages  of  trade.* 
This  custom  of  regulating  dealings  between  native  and  foreign  mer- 
chants was  extended  to  dealings  between  native  merchants,  but  was 
confined  to  the  persons  of  merchants,  as  apart  from  those  pursuing 
other  vocations.'     It  was  not  until  1G66  that  courts  declared  that  "the 

HUNTINGTON,  10  Wend.  (N.  T.)  675;  HALL  r.  FAEMER,  5  Denlo  (N.  T.) 
484. 

•  For  a  discussion  of  the  origin,  history,  and  purpose  of  negotiable  Instru- 
ments, see  GOODWIN  y.  ROBARTS,  L.  R.  10  Exch.  337,  Johns.  Gas.  BiUs 
&  N.  3. 

•  Magna  Charta,  c  30;  Acton  Bumel  de  Mercatorlbus,  11  Edw.  I.;  the  Stat- 
ute of  Merchants,  13  Edw.  L  See.  also.  27  Edw.  III.  cc  19.  20.  See,  also»  13 
Edw.  VI.  0.  10,  34  Hen.  VIII.,  cited  In  Brown,  Abr.  tit  "Customs,"  p.  59. 

«  Co.  Lltt.  182;  2  Inst  404;  VANHEATH  v.  TURNER  (Mich.  Term) 
Winch.  24. 

•  Eaglechllde's  Case,  Het  167;  Lltt  363. 


%  1)  ORIGIN    OF   NEGOTIABILITY.  3 

law  of  merchants  is  the  law  of  the  land,  and  the  custom  is  good  enough 
generally  for  any  man,  without  naming  him  merchant"  • 

Of  the  many  customs  of  merchants,  there  were  two  which  were 
especially  the  subject  of  judicial  interpretation.  They  were  those 
concerning  instruments  which  related  to  the  remittance  of  money 
from  one  place  to  another,  and  in  which  credit  was  used  as 
a  means  of  liquidating  indebtedness, — instiiiments,  in  short,  which 
are  now  called  *nt)ills  of  exchange"  and  "promissory  notes."  Of 
these,  bills,  and  particularly  foreign  bills,  are  by  far  the  more 
ancient  Anderson,  in  his  History  of  Commerce,''  speats  of  one 
granted  by  the  Emperor  Barbarossa  to  the  city  of  Hamburg  in  the 
year  11S9.  "I  remember,"  said  Chief  Justice  Holt,*  "when  actions 
upon  inland  bills  of  exchange  did  first  begin;  and  there  they  laid 
a  particular  custom  between  London  and  Bristol,  and  it  was  an 
action  against  the  acceptor.  The  defendant's  counsel  would  put 
them  to  prove  the  custom,  at  which  Hale,  C.  J.,  who  tried  it,  laughed, 
and  said  they  had  a  hopeful  ease  of  it  And  in  my  Lord  North's 
time  it  was  said  that  the  custom  in  that  case  was  part  of  the  com- 
mon law  of  England,  and  these  actions  since  became  frequent,  as 
the  trade  of  the  nation  did  increase,  and  all  the  difference  between 
foreign  bills  and  inland  bills  is  that  foreign  bills  must  be  protested 
before  a  public  notary  before  the  drawer  can  be  charged,  but  inland 
bills  need  no  protest"  Between  inland  bills  and  promissory  notes 
at  first  there  was  no  distinction.  Both  were  called  Indifferently 
bills  of  exchange.'  The  law  considered  a  promissory  note  in  the 
light  of  a  bill  of  exchange  drawn  by  a  man  upon  himself,  and  ac- 
cepted at  the  time  of  drawing."  And  it  is  worthy  of  remark  that 
the  statement  accepted  by  the  text  writers,  and  repeated  again  and 

•  Woodward  v.  Rowe,  2  Keb.  105,  132.  See,  also,  Anon.,  Hardr.  485  Mich. 
Term,  20  Car.  II.  (18G8)  believed  to  be  MILTON'S  CASE.  Tide  1  Mod.  280; 
Carter  t.  Downish  (1  W.  &  M.,  anno  1688)  Show.  127.  See.  also,  complete 
review  of  the  casea  on  this  subject  in  the  reporter's  note  to  Mandevilie  v. 
Riddle,  1  Cranch,  290. 

T  1  And.   Com.  p.  171. 

•  BULLER  V.  CRIPS.  6  Mod.  29. 

•  GRANT  V.  VAUGHAN,  3  Burrows,  1525.  1  W.  Bl.  488;  Edgar  v.  Chut  1 
Keb.  692,  638;  Horton  v.  Coggs  (Mich.  Term,  2  W.  &  M.  6,  anno  1683)  8  Ler. 
299. 

•  Marlus.  In  hli  Advice,  p.  3;  Lov.  Bills  &  N.«  p.  22;  Kyd,  Bills,  p.  2. 


4  NEGOTIABILITY  SO  FAR  AS  IT  Ki:i,ATi:3  TO  BILLS  AND  NOTES.       (Ch.    1 

again  in  the  cases,  that  a  promissoiy  note  was  never  within  the  cus- 
tom of  merchants,  is  incorrect.^"  It  was  as  much  a  mercantile  in- 
strument as  a  bill  of  exchange.  It  was  introduced  under  the  cus- 
tom of  merchants,  and  it  was  therefore,  up  to  the  time  of  the  famous 
dispute  between  Lord  Holt  and  the  merchants  which  led  to  the 
enactment  of  the  statute  of  Anne,  a  negotiable  instrument  "The 
reason  of  making  the  statute  of  Anne,"  says  Lord  Hardwicke,^* 
"arose  from  some  determinations  in  the  beginning  of  her  reign  by 
Holt,  Chief  Justice,  that  no  action  could  be  maintained  on  a  prom- 
issory note  nor  declairation  thereupon,"  ^'  In  these  decisions  Lord 
Holt  denounced  promissory  notes  as  "only  an  invention  of  the  gold- 
smiths in  Lombard  street."  He  declared  that  "to  allow  such  a  note  to 
carry  any  lien  [obligation]  with  it  were  to  turn  a  piece  of  paper, 
which  is  in  law  but  evidence  of  a  parol  contract,  into  a  specialty."* 
And,  in  defiance  of  established  rules,  I^ord  Holt  refused  to  allow  to 
promissory  notes  the  privilege  of  negotiability. 

Text  of  Statute  of  Anne. 

At  this  juncture,  in  confirmation  of  the  ancient  rule,  and  to  meet 
the  rule  established  by  Lord  Holt,  the  statute  of  Anne  was  enacted. 
It  is  so  important,  and  so  often  referred  to  hereafter,  that  space 
is  given   to   it.     Its  most  important  provisions  are  as  follows: 

10  Hill  V.  Lewis,  1  Salk,  132;  WILLIAMS  v.  WILLIAMS  (viz.  Pasch.  Term,  5 
W.  &  M.,  anno  1G92)  Carth.  2G9;   BROMWICH  v.  LLOYD,  2  Lutw.  503. 

11  WALMSLEY  v.  CHILD  (anuo  1749)  1  Ves.  Sr.  34G. 

12  CLERK  V.  MARTIN,  1  Salk.  129,  2  Ld.  Raymond,  757;  Potter  v.  Pearson, 
2  Ld.  Raym.  759. 

•  "The  term  'specialty'  Is  applied  to  an  Instrument  which  becomes  effective 
by  the  mere  fact  of  its  formal  execution.  There  are  two  classes  of  specialty 
contracts  in  the  English  law, — common-law  specialties  and  mercantile  special- 
ties. The  first  class  includes  bonds  and  covenants,—!,  e.  Instruments  under  seal; 
the  second  class  includes  bills  and  notes,  and  policies  of  insurance,  and  possi- 
bly other  mercantile  instruments.  There  is  a  prevalent  notion,  traceable  to 
an  opinion  given  in  the  house  of  lords  in  1778,  In  the  case  of  Rann  v.  Hughes, 
7  Term  R.  350,  note,  that  only  contracts  under  seal  can  be  specialties;  all 
other  contracts,  whether  written  or  oral,  being  merely  simple  contracts.  The 
fallacy  of  this  notion  is  easily  demonstrable  by  an  examination  of  the  re- 
semblances between  bills  and  notes  and  instruments  under  seal,  on  the  one 
hand,  and  the  differences  between  bills  and  notes  and  simple  contracts  on  the 
other  hand,  In  those  points  in  which  specialties  and  simple  contracts  most  strik- 
ingly differ  from  each  other."    2  Ames,  Cas.  Bills  &  N.  872. 


§  1)  ORIGIN    OF    NEGOTIABILITY.  5 

''Wliereas,  It  hath  been  held  that  notes  in  writing,  signed  by  the 
party  who  makes  the  same,  whereby  such  party  promises  to  pay 
unto  any  other  person,  or  his  order,  any  sum  therein  mentioned,  are 
not  assignable  or  indorsable  over,  within  the  custom  of  merchants, 
to  any  other  person ;  and  that  the  person  to  whom  the  sum  of  money 
mentioned  in  such  note  is  payable  cannot  maintain  an  action  by  the 
custom  of  merchants,  against  the  person  who  first  made  and  signed 
the  same;  and  that  any  person  to  whom  such  note  shall  be  assigned, 
Indorsed,  or  made  payable  could  not,  within  the  said  custom  of 
merchants,  maintain  any  action  upon  such  note  against  the  person 
who  first  drew  and  signed  the  same:  Therefore,  to  the  intent  to  en- 
courage trade  and  commerce,  which  will  be  much  advanced  if  such 
notes  shall  have  the  same  effect  as  inland  bills  of  exchange,  and  shall 
be  negotiated  in  like  manner,  be  it  enacted,  that  all  notes  in  writ- 
ing whereby  any  person  shall  promise  to  pay  to  any  other  person, 
his  order  or  unto  bearer  any  sum  of  money  mentioned  in  the  note 
shall  be  taken  and  construed  to  be  payable  to  any  such  person  to 
whom  the  same  shall  be  payable;  and  also  every  such  note  shall 
be  assignable  or  indorsable  over  in  the  same  manner  as  inland  bills 
of  exchange  are  according  to  the  custom  of  merchants;  and  that  the 
person  to  whom  such  sum  of  money  is  payable  may  maintain  an  ac- 
tion for  the  same  as  he  might  do  upon  an  inland  bill  of  exchange 
made,  or  drawn,  according  to  the  custom  of  merchants;  and  that  any 
person  to  whom  such  note  is  indorsed,  or  assigned,  or  the  money 
therein  mentioned  ordered  to  be  paid  by  indorsement  thereon,  may 
maintain  his  action  for  such  sum  of  money  either  against  the  person 
who  signed  the  note,  or  against  any  of  the  persons  that  indorsed  the 
same,  in  like  manner  as  in  cases  of  inland  bills  of  exohanjie."  Thus 
by  the  statute  of  Anne  the  negotiability  of  notes  was  established. 
Its  principles  have  been  followed  and  generally  embodied  in  the  stat- 
utes of  the  various  states  of  the  Union.  And  in  the  many  cases 
which  arise  with  reference  to  the  negotiability  of  instruments  in 
forms  of  notes,  the  point  is  to  determine  whether  they  were  such 
as  were  within  the  purview  of  the  statute  of  Anne,  or  of  the  statutes 
of  the  various  states  which  have  embodied  the  principles  of  the  stat- 
ute of  Anne. 
CoriHtructlon  of  Statute  of  Anne — Non-nerjotinhle  Notes. 

The  statute  of  Anne,  at  the  hands  of  the  courts,  has  been  con- 
fitrued  with  great  latitude,  a  latitude  in  fact  which  renders  some- 


8  NEQOTIABILITY  SO  FAR  AS  IT  RELATES  TO  BILLS  AND  NOTES.       (Ch.    1 

what  inconsistent  and  irreconcilable  the  theories  of  negotiable  and 
non-negotiable  instruments.  The  English,  courts  after  Its  enactment 
looked  upon  it  as  a  remedial  statute,  as  it  undoubtedly  was.  But 
by  a  line  of  cases  \\liich  seem  to  go  beyond  the  utmost  limits  of  it» 
evident  intendment,  the  courts  also  declared  that  non-negotiable 
notes  came  within  the  statute's  provisions."  A  payee,  they  decided, 
could  maintain  an  action  within  the  statute  against  the  maker,  by 
which  was  meant  only  that  the  payee  could  declare  upon  the  note, 
under  the  statute,  instead  of  declaring  upon  the  consideration  or 
transaction  which  led  to  its  being  given.  This  interpretation,  which 
in  its  inception  was  possibly  an  adaptation  of  an  artificial  system 
of  pleading  to  business  needs,  has  resulted  in  confusion-  In  New 
York,**  for  instance,  it  seems  to  be  the  view  of  the  courts  that  non- 
negotiable  notes  differ  from  negotiable  ones  only  in  two  main  par- 
ticulars. One  is  that  the  indorser  is  regarded  as  a  maker  or  guar- 
antor, and  not  as  a  simple  indorser;  the  other  that  the  equities 
between  the  parties  are  not  a  subject  of  set-off  when  the  instrument 
is  transferred  to  a  bona  fide  purchaser  for  value  before  maturity. 
Therefore  in  New  York  the  general  rule  of  contracts,  that  there 
cannot  be  a  recovery  upon  them  without  proof  of  consideration,  does 
not  obtain  with  non-negotiable  instruments,  and  the  non-negotiable 
promise  to  pay  money  is  itself  presumption  of  a  consideration.**  So. 
too,  in  Massachusetts,  where,  although  the  statute  of  Anne  has 
never  been  enacted,  its  doctrines  are  regarded  as  declaratory  of  the 
common  law,**  the  early  English  rule  is  followed.*'     The  courts  of 

i«  Kyd,  Eich.  (1790)  65;  SMITH  v.  KENDALL,  6  Term  R.  123;  1  Esp.  N.  P. 
231;  Burchell  v.  Slocock,  2  Ld.  Raym.  1545;  MILLER  v.  DIDDLE,  13  Law 
T.  (N.  S.)  334. 

1*  Maule  V.  Crawford,  14  Hun,  193;  Lee  v.  Swift,  1  Denlo,  565;  Barrick  T. 
Austin,  21  Barb,  241, 

16  PRESIDENT,  ETC.,  OF  TURNPIKE  ROAD  V.  HURTIN,  9  Johns.  217; 
KIMBALL  V.  HUNTINGTON,  10  Wend.  675;  Paine  v.  Noelke,  53  How.  Prac. 
273;  3  Kent,  Comm,  77;  CARNWRIGHT  v.  GRAY,  127  N.  Y.  92,  27  N.  E.  835. 
The  New  York  statute,  which  was  a  substantial  re-enactment  of  the  statiite  of 
Anne,  has  been  replaced  by  Neg.  Inst.  L.  §  320,  by  which  the  law  In  this  respect, 
it  seems,  has  been  changed. 

le  Richards  v.  Barlow,  140  Mass.  218,  6  N.  E.  68. 

IT  TOWNSEND  v.  DERBY,  3  Mete.  363;  DEAN  v.  CARRUTH,  108  Mass- 
242.     But  in  Massachusetts,  in  case  of  disputed  consideration,  the  burden  of 


§  1)  ORIGIN    OF    NEGOTIABILITY.  7 

Connecticut,  however,  have  adopted  a  different  rule.*'  With  them, 
where  the  note  Is  not  negotiable,  It  is  a  mere  contract  between  the 
original  parties,  not  intended  for  transfer,  and  a  consideration  must 
be  shown.  This  Is  more  consistent  with  the  original  intention  of 
the  statute.  For  one  of  the  most  marked  distinctions  between  the 
custom  of  merchants  and  the  rules  of  common  law  was  in  refer- 
ence to  the  assignment  of  contract  rights.  The  custom  of  mer- 
chants aimed  to  shut  out  equities  from  following  transfer.  Accord- 
ing to  that  custom,  want  of  consideration  was  no  defense  to  an 
instrument  In  the  hands  of  a  bona  fide  holder,  and  hence,  by  way 
of  corollary,  came  the  doctrine  that  an  expression  of  consideration 
in  the  Instrument  itself  was  wholly  unnecessary.  But  this  was  con- 
fined to  negotiable  instruments.  It  did  not  include  non-negotiable 
ones. 

Non-negotidhle  Sills  and  Notes. 

Negotiability  is  not  essential  to  the  validity  of  a  bill  of  exchange, 
and  although  it  be  payable  to  a  designated  person,  and  not  to  order 
or  to  bearer,  it  imports  consideratiou,  and  in  au  action  by  the  payee 
consideration  need  not  be  averred  or  proved.*  K,  however,  the  instru- 
ment lacks  any  of  the  essential  qualities  of  a  bill  of  exchange, — for 
example,  if  it  be  drawn  upon  a  particular  fund,  or  be  payable  in  an- 
other medium  than  money, — no  presumption  of  consideration  arises.** 
tSuch  instruments  are,  in  general,  mere  assignments  or  orders.  A  num- 
ber of  important  distinctions  between  them  and  negotiable  bills  are 
to  be  pointed  out:  A  person  suing  the  acceptor  must  show  funds 
in  the  acceptor's  hands  to  pay,^"  for  the  agreement  is  not  an  ac- 
ceptance, but  a  mere  promise  to  pay,  and  must  be  based  upon  a 
suflQcient  consideration.'*     The  acceptor  cannot  be  sued  upon  the 

proof  Is  on  the  plaintlfif,  Perley  v.  Perley,  144  Mass.  104,  10  N.  E.  726;  Simpson 
T.  Davis.  119  Mass.  269.     But  see  Neg.  Inst.  L.  §  320. 

i«  EDGERTON  v.  EDGERTON,  8  Conn.  6;  BRISTOL  v.  WARNER,  19  Conn. 
7;   Daniels,  Neg.  Inst.  §  102;    Pars.  Bills  &  N.  227. 

•  JOSSELYN  v.  LACIER,  10  Mod.  294;  AVERETT  T.  BOOKER.  15  Grat 
(Va.)  103;  Louisville.  E.  &  St.  L,  R.  Co.  v.  Caldwell.  98  Ind.  245;  Arnold  v. 
Bprague.  34  Vt.  402;    Daniel  Neg.  Inst  §  161;    4  Am.  &  Eng.  Enc.  Law,  187. 

19  Raubitschek  v.  Blank,  80  N.  Y,  479;  AVERETT  v.  BOOKER,  supra; 
Wells  V.  Brighana,  6  Cush.  (Mass.)  6;   Atkinson  v.  Mauks,  1  Cow.  (N.  Y.)  091. 

20  MUNGER  T.  SHANNON,  61  N.  Y.  25L 
SI  Atkinson  t.  Manks,  1  Cow.  69L 


8  NEGOTIABILITY  SO  FAR  AS  IT  RELATES  TO  BILLS  AND  NOTES.       (Ch.    1 

bill,  but  upon  the  promise  to  pay  evidenced  bj  tlie  acceptance.  Tlie 
acceptor  is  under  no  general  liability  to  pay  the  bill  in  the  first  in- 
stance. Non-negotiable  bills  are  assignments  in  the  sense  that  they 
are  directions  to  appropriate  and  hold  the  property  specified  in  them 
to  the  use  of  a  third  person.  The  third  person  has  them  thus  as- 
signed to  him,  and  this  whether  they  consist  of  the  whole  or  part 
of  the  fund,  and  whether  assented  to  or  not  by  the  drawee,  as  long 
as  the  drawee  had  notice  of  it"  They  are  treated  as  moneys  or 
property  held  by  the  drawee  for  another."* 

There  are  some  features  which  non-negotiable  bills  and  non-nego- 
tiable notes  also  have  in  common.  When  transferred,  it  is  by  opera- 
tion of  the  theory  of  assignment,  and  not  of  indorsement,^*  and  the 
fact  of  possession  of  either  the  bill  or  note  is  not  evidence  of  such  ti- 
tle that  its  mere  production  upon  a  trial  is  prima  facie  evidence 
of  a  right  to  recover.  And,  lastly,  title  to  either  a  non-negotiable 
bill  or  note  is  subject  to  every  equity.  Under  the  strict  common- 
law  rule  the  indorsee  of  a  bill  or  note,  in  its  terms  not  negotiable, 
may  sue  his  immediate  indorser  in  his  own  name,  but  he  can  only 
sue  the  maker  or  remote  indorser  in  the  name  of  the  original  payee, 
except  where  special  statute  otherwise  provides.  The  indorser  of 
paper  not  negotiable  is  only  responsible  to  parties  not  immediate 
where  he  especially  contracts  to  be  so,  being  treated  as  guarantor 
or  maker.  And,  lastly,  an  indorser  of  either  cannot  insist  on  de> 
maud  and  notice  as  a  condition  precedent"* 

a«  Morton  r.  Naylor,  1  Hill,  583;  Mandevllle  v.  Welch,  5  Wheat.  277;  ROW 
T.  DAWSON,  1  Ves.  Sr.  331;  Lett  v.  Morris,  4  Sim.  607;  BRILL  v.  TUTTLE, 
81  N.  Y.  457;  EHRICHS  v.  DE  MILL,  75  N.  Y.  370;  Robbins  v.  Bacon,  3 
Greenl.  (Me.)  346;  Bank  of  Commerce  v.  Bogy,  44  Mo.  18. 

28  Lowery  v.  Steward,  25  N.  Y.  239,  243. 

2*  An  assignment,  as  applied  to  bills  and  notes.  Is  the  transfer,  by  writing, 
of  an  interest  therein.     Franklin  v.  Twogood,  18  Iowa,  515. 

26  Richards  v.  Warring,  4  Abb.  Dec.  50;  McMULLEN  v.  RAFFERTY,  89 
N.  Y.  456;  CROMWELL  v.  HEWITT.  40  N.  Y.  491;  STORY  v.  LAMB,  52  Mich. 
525,  18  N.  W.  248;  Shlnn  r.  Fredericks,  56  111.  439;  Rabberman  v.  Muehl- 
hausin.  3  11'   App.  826. 


§§  2-7)       DISTINCTION    BETWEEN    ASSIGNABILITY    AND    NEGOTIABILITY.         9 

DISTINCTION   BETWEEN  ASSIGNABILITY  AND  NEGOTIA- 
BILITY. 

2.  Assignability  pertains  to  contracts  in  general. 

8.  An  assignment  is  the   legal   method   of  transferring* 
property  or  rights  evidenced  by  contract. 

4.  It  is  an  impracticable  method,  as  regards  a  circulat- 
ing medium,  because: 

(a)  Title  created  by  assignment,  as  against  the  debtor, 

is  not  complete  ■without  notice  to  the  debtor. 

(b)  No  subsequent  purchaser  of  the  property  or  right 

can  acquire  better  title  than  that  of  his  imme- 
diate assignor. 

6.  Wegotiability  pertains  to  a  special  class  of  contracts. 

6-7.  Negotiability  facilitates  their  transfer  as  a  circulat- 
ing medium,  because: 

(a)  The  bona  fide  purchaser  for  value  is  presumed  to 

be  the  true  owner,  and  has  good  title. 

(b)  Transfer  is  effected  by  indorsement  or  delivery, 

(c)  In  general,  a  consideration  for  the  contractual  re- 

lation is  conclusively  presumed  as  between  par- 
ties not  immediate. 

We  purpose  here  to  state  briefly  the  fundamental  reasons  why 
negotiable  bills  and  notes  could  not  readily  be  transferred  as  a 
circulating  medium  under  the  rules  governing  the  transfer  of 
ordinary  choses  in  action.  The  rights  evidenced  or  created  by 
ordinary  contractual  obligations  are  almost  always  a  kind  of 
property,  having  in  themselves  a  value  measured  in  law  by  the  dam 
ages  assessable  upon  their  breach.  This  property  may  at  this  stage 
of  the  law  pass  from  person  to  person  just  as  any  other  property 
does.  But  there  are  well-settled  rules  governing  such  transfer,  which 
are  the  outgi-owth  and  mingling  of  early  doctrines  of  the  courts  of 
common  law  and  of  equity,  and  at  which  the  student  must  glance 
to  understand  the  rules  themselves.  To  this  must  also  be  added 
the  statement  that  stiitntes,  from  time  to  time,  have  been  largely 
instrumental  in   moulding  these  doctrines  of  common   law  and  of 


10  NEGOTIABILITY  SO  FAR  AS  IT  RKI.ATES  TO  BII.I.S  AND  NOTES.        (Ch.    1 

equity  into  the  form  which  the  theory  of  assignment  of  chosea  in 
action  presents  at  the  present  time. 

Asxi(/7iment. 

It  was  probably  the  common-law  rule  in  the  first  instance  that  no 
assignee  of  the  benefits  of  a  contract  could  sue  for  and  recover  them. 
The  primitive  view  was,  in  the  first  place,  that  the  contract  created 
a  strictly  personal  obligation  between  the  creditor  and  the  debtor, 
and  also  that  the  assignment  of  choses  in  action  would  increase  lit- 
igation,— a  reason  which  led  the  courts  to  set  their  faces  resolutely 
against  it*'  And  whether  from  reasons  of  business  expediency,  or 
because  they  were  influenced  by  equitable  doctrines,  is  not  clear, 
but  the  courts  of  common  law  at  an  early  day  modified  this  rule 
into  one  that  for  a  long  time  prevailed,  namely,  that  an  assignment 
of  a  contract  might  be  made,  but  the  assignee  must  sue  for  its  ben- 
efit in  the  name  of  the  assignor  or  his  representatives.  The  theory 
was  that  the  courts  of  common  law  would  so  far  take  cognizance  of 
equitable  rights  created  by  the  assignment  that  the  name  of  the 
assignor  might  be  used  as  a  trustee  of  the  benefits  of  the  contract 
for  the  benefit  of  the  assignee.*^  This  doctrine  has  been  generally 
modified  by  statutes,  the  commonest  ones,  in  the  United  States,  be- 
ing the  provisions  of  the  various  Codes, — that  "every  action  must 
be  prosecuted  by  the  real  party  in  interest,"  and  that  the  "transfer 
of  every  claim  or  demand  passes  an  interest  which  the  transferee 
may  enforce  by  an  action  in  his  own  name,  as  the  transferrer  might 
have  done."  With  courts  of  equity,  it  is  true,  the  rule  was  dif- 
ferent. For  in  equity,  from  immemorial  times,  the  assignment  of 
a  chose  in  action  or  of  the  benefits  under  a  contract  has  been  per- 
mitted, and  the  assignee  could  maintain  a  duit  in  equity  in  his  own 
name.**  But,  however  salutary  the  operation  of  this  equitable  rule 
might  have  been  in  some  phases  of  the  enforcement  of  contract 
rights,  it  could  have  had  little  influence  with  bills  and  notes.  Cases 
arising  upon  them  came  within  the  cognizance  of  the  courts  of  com- 
mon law.    And  there  are  cases  to  show  that  even  when  the  as- 

28  Pol.  Cont  207;   Beecher  v.  Buckingham,  18  Conn.  110. 

27  Caister  v.  Eccles.  1  Ld.  Raym.  683;  McWILLIAM  v.  WEBB,  32  Iowa,  577; 
Halloran  v.  Whitcomb.  43  Vt.  306;   Fay  v.  Guynon,  131  Mass.  31. 

2  8  Smith  V.  Brittain.  3  Ired.  Eq.  (N.  J.)  347;  TIBBETS  v.  GERRISH,  25  N. 
H.  41. 


§§2-7)       DISTINCTION  BETWEEN    ASSIGNABILITY  AND    NEGOTIABILITY.       11 

signed  non-negotiable  promise  was  to  pay  a  sum  of  money  to  the 
promisee,  or  to  bearer,  or  to  order,  or  where,  by  any  other  form 
of  words,  the  instrument  purported  to  be  made  assignable,  even 
then  the  holder  could  not  sue  in  his  own  name,  but  only  in  that 
of  his  assignor.'*     This  objection,  inasmuch  as  it  related  only  to 
the  form  of  action,  was  not  of  vital  importance.     Yet  were  it  the  rule 
that  the  transferees  of  negotiable  instruments  must  sue  in  the  name  of 
their  transferrers,  it  would  certainly  clog  their  circulation,  since  it 
would  complicate  and  render  less  certain  the  recovery  of  judgments 
upon  them. 

There  were  other  rules  relating  to  the  transfer  of  ordinary  con- 
tracts, governing  alike  courts  of  common  law  and  equity,  which 
were  of  greater  practical  importance.  The  first  is  the  doctrine  of 
notice.  The  rule  governing  assignment,  as  stated  in  the  principal 
text,  is  that  title  by  assignment,  as  against  the  debtor,  is  not  com- 
plete without  notice  to  him.  As  the  result  of  this  rule,  follows 
the  one  that  a  debtor  who  performs  his  contract  to  the  orig- 
inal creditor,  without  notice  of  any  assignment  by  the  creditor 
to  another  person,  is  released  from  his  obligation  under  it.^°  An 
illustration  of  this  principle  is  a  well-known  case  where  a  bond  and 
mortgage  had  been  given,  and  assigned  by  various  intermediate  as- 
signments, not  recorded  until  some  nine  years  afterwards.  At  that 
time  the  mortgage  was  attempted  to  be  foreclosed  by  the  true  owner. 
In  the  meantime  the  mortgagor  had  made  various  payments  upon 
the  mortgage,  and  finally  had  paid  it  up  in  full  to  the  original  mort- 
gagee, some  three  years  before  the  foreclosure.  These  payments, 
on  the  mortgagor's  part,  were  made  without  notice  or  knowledge 
of  the  assignments.  And  upon  these  facts  it  was  held  that  the  mort- 
gagor was  to  be  protected,  and  would  even  have  been  protected  if 
the  assignments  had  been  recorded,  because  notice  must  be  given 
or  brought  home  to  the  mortgagor  not  to  pay  the  original  mortgagee, 
else  payments  to  such  mortgagee  on  account  of  the  mortgage  are 

2»  COOLIDGE  v.  RUGGLES.  15  Mass.  387;  CLARK  v.  KINO,  2  Mass.  524; 
Weidler  v.  Kauffman,  14  Ohio,  455;  Jones  v.  Carter,  8  Q.  B.  1.34. 

80  jurlson  v.  Corcoran,  17  Uow.  612;  VAN  P.USKIRK  v.  INSURANCE  CO., 
14  Conn.  141;  Smith  v.  Ewer,  22  I'a.  St.  110;  MERCHANTS'  AND  MECHAN- 
ICS' BANK  V.  HEWE'IT,  3  Iowa.  93;  Wlnberry  v.  Koonce.  83  N.  C.  351;  Uob- 
son  V.  Stevenson.  1  Tenn.  Ch.  203;    Richards  v.  Griggs,  16  Mo.  410. 


12  NEGOTIABILITY  SO  FAR  AS  IT  RELATES  TO  BILLS  AND  NOTES.       (Ch.   1 

perfectly  valid.'*  This  is  the  logical  outgrowth  of  the  theory  of 
assignment,  as  explained  in  the  English  case  of  Stocks  v.  Dob- 
gQjj  8  2  <'Xhe  debtor,"  said  the  court,  "is  liable  at  law  to  the  a&- 
signor  of  the  debt,  and  at  law  must  pay  the  assignor  if  the  as- 
signor sues  in  respect  of  it  If  so,  it  follows  that  he  may  pay  with- 
out suit  The  payment  of  the  debtor  to  the  assignor  discharges  the 
debt  at  law.  The  assignee  has  no  legal  right,  and  can  only  sue  in 
the  assignor's  name.  How  can  he  sue  if  the  debt  has  been  paid? 
The  law,  therefore,  has  required  notice  to  be  given  to  the  debtor 
of  the  assignment,  in  order  to  perfect  the  title  of  the  assignee." 

There  is  another  feature  of  assignments  to  be  considered.  It  is  true 
that  the  courts  in  many  of  the  states  at  the  present  day  will  de- 
cline to  examine  into  the  consideration  of  the  assignment  of  an  or- 
dinary contract,  holding  that  a  payment  of  it  by  the  debtor  to  the 
person  who  holds  the  rights  under  a  valid  assignment  will  release 
the  debtor  from  his  liability."  T>\it  it  was  probably  the  common- 
law  rule,  and  certainly  the  equity  rule,  that  an  assignment  would 
not  be  supported  unless  consideration  had  been  given  by  the  as- 
signee.^* 

Negotiability. 

The  rules  in  regard  to  negotiabi'^?/  are  in  sharp  contrast  with  these 
principles  goveniing  assignments.  If  a  negotiable  bill  or  note  is  made 
payable  to  bearer,  or  indorsed  in  blank,  the  debtor  is  prima  facie  pro- 
tected in  payments  made  to  the  person  who  has  the  instrument  in  hia 
possession.^ °  The  pereon  having  the  instrument  in  his  posse^^ion  is, 
under  such  circumstances,  presumed  to  own  it,  and  to  have  a  legal 
right  to  it.'"     A  purchaser  in  good  faith  from  one  who  has  stolen  it 

81  Van  Keuren  v.  Corklns,  66  N.  Y.  77. 

«2  stocks  v.  Dobson,  4  De  Gex,  M.  .&  G.  1.5. 

83  Sheridan  v.  Mayor,  etc.,  68  N.  Y.  30;  Biirtnett  v.  Gwrnne.  2  Abb.  Prac.  79; 
Stone  V.  Frost,  61  N.  Y.  614;  Allen  v.  Brown,  44  N.  Y.  228;  Durgin  v.  Ireland, 
14  N.  Y.  322. 

8*  Anson,  Cont.  p.  222, 

86  Pettee  v.  Trout,  3  Gray,  502;  Way  v.  Rlchf.rrison.  Td.  412;  Garvin  v. 
Wiswell,  83  lU.  215;  Jewett  v.  Cook,  81  111.  260;  COLLINS  v.  GILREKT.  94  U. 
S.  753;  Rubey  v.  Ciilbertson,  35  Iowa,  264;  Ecton  v.  Halan,  20  Kan.  452;  Wells 
T.  Schoonover,  9  Heisk.  806. 

86  Wilson  Sewing-Mach.  Co.  v.  Spears.  50  Mich.  534,  15  N.  W.  894;  First 
Nat  Bank  v.  Sollenberger,  1  Lancast.  Law  Ilev.  75. 


§§2-7)       DISTIN  CTION  BETWEEN    ASSIGNABILITY  AND    NEGOTIABILITY.        13 

acquires  a  valid  title."  If  these  were  not  the  rules  every  bank  or 
merchant  who  took  the  instrument,  and  gave  money  or  value  for  it, 
would  be  compelled  to  make  inquiries,  and  also  give  notice  of  owner- 
ship of  the  instrument  to  all  prior  parties,  in  order  to  prevent  the  in- 
strument being  paid  to  some  one  else.  Several  results  would  in- 
evitably Cow  from  these  conditions.  Business  men  would  decline  to 
take  such  trouble.  This  friction  would  check  the  circulation  of  bills 
and  notes,  and  destroy  their  effectiveness  as  a  quasi  money.  And 
thus,  so  far  as  negotiable  bills  and  notes  could  aid  it,  credit  would  no 
longer  be  as  good  as  cash  in  the  commercial  markets  of  the  world. 

Equities  hetween  Prior  Parties. 

The  last  and  perhaps  most  important  distinction  made  between 
the  transfers  of  non-negotiable  contracts  and  those  of  negotiable  bills 
and  notes  is  that  in  case  of  the  former  the  assignee  takes  subject 
to  the  equities  or  defenses  existing  between  the  prior  parties,  while 
the  bona  fide  holder  of  a  negotiable  instrument  may  disregard  these 
equities,  and  recover  upon  suit  the  full  amount  called  for  by  the 
instrument  he  buys.  According  to  the  Honorable  Theodore  Dwight,'* 
the  assignee  of  a  non-negotiable  contract  takes  subject,  not  only  to 
the  equities  existing  between  the  original  parties,  but  also  must  al- 
ways abide  the  case  of  the  person  from  whom  he  buys.  The  holder 
of  a  chose  ia  action  cannot  alienate  anything  but  the  beneficial  in- 
terest he  possesses.*'  It  is  a  question  of  power  or  capacity  to  trans- 
fer to  another,  and  that  capacity  is  to  be  exactly  measured  by  his 
own  rights.  This  is  undoubtedly  the  law  in  England  and  in  New 
York,  though  in  many  of  the  states  of  the  Union  the  gi-eat  authority 
of  Chief  Justice  Kent  has  prevailed  to  limit  the  equities  to  those 
existing  between  the  original  parties,  and  does  not  extend  them  to 
those  existing  in  favor  of  third  parties.     The  technical  or  theoret- 

87  Spooner  v.  Holmes,  102  Mass.  503;  Birdsall  v.  Russell,  20  N  Y.  220; 
EVERTSON  V.  BANK,  6G  N.  Y.  14.     See,  also,  post,  p.  llL 

8  8  Trustees  of  Union  College  v.  Wheeler,  Gl  N.  Y.  88. 

88  WAKXEU  V.  WHITTAKER,  6  Mich.  133;  Seligman  v.  Ton  Eyck's  Estate, 
49  Mich.  104,  13  N.  W.  377;  Shotwell  v.  Wobb,  23  Miss.  375;  Howell  v.  Medlcr. 
41  Mich.  641.  2  N.  W.  911;  Ayres  v.  Campbell.  9  Iowa,  213;  TIM.MS  v.  SHAN- 
NON, 19  Md.  29G;  State  Mut.  Fire  Ins.  Co.  v.  Roberts,  31  Pa.  St.  438;  Gary  v. 
Bancroft,  14  Pick.  315;  Harwood  v.  Jones.  10  Gill.  &  J.  404;  Scott  v.  ScUreeve, 
12  Wheat.  GOu. 


14  NEGOTIABILITY  SO  FAR  AS  IT  RELATES  TO  BILLS  AND  NOTES.        (Ch.    1 

ical  reason  of  the  rule  Is  that  given  by  Judge  Stoiy.*"  **EAery  as- 
signment of  a  chose  in  action  is  considered  in  equity  as  in  its  nature 
amounting  to  a  declaration  of  trust  and  to  an  agreement  to  permit 
the  assignee  to  make  use  of  the  name  of  the  assignor  in  order  to 
recover  the  debt,  or  to  reduce  the  property  into  possession."  This 
theory  leads  to  the  conclusion  that  the  action  by  the  assignee  must 
be  precisely  commensurate  with  that  of  the  assignor,  as  it  must  be 
in  his  name,  and  on  the  supposition  that,  for  the  purposes  of  the 
action,  he  is  still  the  owner. 

INDICIA  OF  NEGOTIABILITY. 

8.  Tlie  instrument  must  contain  express  -words  of  nego- 
tiability, although  there  is  no  set  form  of  such  expression. 
It  is  enough  if  the  intention  of  the  parties  to  make  it  ne- 
gotiable can  be  fairly  construed  from  the  terms  of  the 
contract. 

9.  The  usual  form  of  making  an  instrument  negotiable 
is  making  it  payable  either 

(a)  To  order,  or 

(b)  To  bearer.*^ 

It  is  the  purpose  of  these  sections  to  explain  what  form  of  words, 
when  they  occur  in  an  order  or  promise  to  pay  money,  makes  that  order 
or  promise  a  negotiable  one;  or,  in  other  words,  what  are  the  indicia 
of  negotiability.  As  has  been  said,  negotiability  is  the  peculiar  theory 
of  the  law  merchant,  and  the  law  merchant  has  as  its  source  the 
usages  of  trade,  which  have  been  recognized  and  formulated  into  rules 
of  law  by  the  courts,  and  sometimes  declared,  and  even  modified,  by 
statute. 

The  first  question,  then,  Is,  what  Indicia  are  declared  by  the  stat- 
utes to  confer  negotiability  upon  orders  or  promises  to  pay  money? 
These  indicia  consist  in  the  first  place  in  certain  words  or  phrases 
created  by  and  appearing  in  the  statute  itself.  The  statute  of 
Anne,  for  example,  declares,  in  words,  that  "all  notes  whereby  one 

*o  Story,  Eq.  Jur.  §  1040. 

*i  Mcmullen  v.  RAFFERTY,  89  N.  Y.  456;  CROMWELL  T.  HEWITT, 
40  N.  Y.  491. 


§§  8-9)  INDICIA    OF    NEGOTIABILITY.  15 

doth  promise  to  pay  to  any  other  person,  his  order,  or  unto  bearer, 
shall  be  assignable  or  indorsable  over  as  inland  bills  of  exchange, 
according  to  the  custom  of  merchants."  *' 

In  very  many  states  these  words  of  the  statute  of  Anne,  or  words 
quite  similar  to  them,  have  been  re-enacted.  In  some  states,  in  ad- 
dition to  the  foregoing  phrases,  specified  in  the  statute  of  Anne, 
peculiar  phrases  are  essential  to  negotiability.  In  some  states  nego- 
tiability has  been  limited  to  notes  containing  the  words  "without 
defalcation  and  discount."  *'  In  Alabama  **  only  bills  of  exchange 
and  promissory  notes  payable  in  money  at  a  bank,  or  private  banking 
house,  or  other  place  of  payment  expressed,  are  made  negotiable,  and 
governed  by  the  law  merchant;  other  contracts  in  writing  being  as- 
signable subject  to  defenses.*"^  In  Indiana  *®  promissory  notes,  to  be 
negotiable  independent  of  equities,  must  be  payable  to  order  or  bearer 
at  a  bank  in  Indiana.  In  Kentucky  "  only  such  promissory  notes  as 
are  made  payable  and  negotiable  at  a  bank  incorporated  by  the  state 
law,  and  are  indorsed  and  discounted  by  such  bank  or  some  other  bank 
in  Kentucky,  are  negotiable  like  foreign  bills  of  exchange;  all  other 
bills  and  notes  are  assignable  subject  to  defenses.*^  And  to  deter- 
mine whether  an  instrument  contains  the  quality  of  negotiability,  we 
must  first  turn  to  the  statute  of  the  state,  and,  if  there  apjiear  upon  the 
face  of  the  instrument  the  phrases  authorized  by  the  statute,  then,  oth- 
er things  being  equal,  the  instrument  is  negotiable.  And,  as  apjx'ars 
hereafter,  except  in  the  case  of  a  restrictive  indorsement,  an  instru- 
ment once  stamped  by  the  original  parties  with  the  character  of  nego- 
tiability in  most  cases  cannot  be  deprived  of  this  characteristic,  but 
remains  so  despite  the  subsequent  agreement  or  conduct  of  the  parties 
transferring  it. 

4  2  GOODWIN  V.  ROBARTS,  L.  R.  10  Exch.  337,  Johns.  Cas.  Bills  &  N.  3. 
See  Neg.  Inst.  L.  f  20. 

*8  See  Rand.  Com.  Paper,  §  86. 

«*  Code,  §§  1756,  1757. 

4  8  See  OATES  v.  BANK,  100  U.  S.  239. 

4  8  Horner's  Rev.  St  §  5506. 

4T  St.  §  483. 

48  St.  §  474.  It  Is  Impossible  In  a  work  of  this  charnrter  to  ennmernte  or  dis- 
cuss the  various  statutory  provisions  peculiar  to  difTerout  states.  Tlicy  are 
collected  in  Rand.  Com.  Paper,  §S  DG,  128,  174.     In  many  states  such  provisions 


16  NEGOTIABILITY  SO  FAB  AS  IT  RELATES  TO  BILLS  AND  NOTES.       (Ch.    1 

WTiile  it  is  unquestioned  that  bills  and  notes,  correct  in  other  re- 
spects, drawn  in  the  words  of  the  statutes,  are  negotiable,  tliose 
words  are  not  the  only  forms  of  words  which  will  confer  negotia- 
bility. Some  express  words  are,  however,  necessary  to  confer  this 
quality.  A  note  in  words,**  "8  mouths  after  date,  we  promise  to 
pay  G.  ET.  $275,  for  value  received,"  was  held  not  a  negotiable  note, 
because  the  statute  directed  words  of  negotiability.  But  the  true 
reason  is  that  laid  down  by  Lord  Holt,""  given  in  a  case  where  the 
words  "or  his  order"  were  omitted  from  a  bill.  "And  the  chief 
justice  did  agree  that  the  indorsement  of  this  bill  did  not  make 
him  that  drew  the  bill  chargeable  to  the  indorsee,  for  the  words 
*or  his  order'  did  give  authority  to  assign  it  by  indorsement,  and  it  is 
an  agreement  by  the  first  drawer  that  he  would  answer  it  to  the  as- 
signee." 

What  words  will  then  be  deemed  by  the  courts  to  confer  negotia- 
bility? "Whether  the  parties  to  an  insti-ument  can  give  it  a  nego- 
tiable character,  with  all  the  incidents  pertaining  to  negotiable 
paper,  when  it  is  not  in  terms  within  the  class  of  instruments  known 
to  the  law  as  'negotiable,'  may  be  questioned,"  says  Allen,  J.,  in 
EVERTSON  V.  NATIONAL  BANK."  But,  however  this  may  be 
with  instruments  intended  to  be  other  than  orders  or  promises  for  the 
payment  of  money  alone,  still  it  is  probably  the  rule  that,  in  the  instru- 
ments governed  by  the  rules  of  the  law  merchant,  any  words  in  a  bill  or 
note  whence  it  can  be  inferred  that  the  person  making  it  intended  it  to 
be  negotiable,  will  give  it  a  transferable  quality  against  that  person. "^^ 

have  been  repealed  by  enactment  of  the  Negotiable  Instruments  Law.     See 
section  20  et  seq. 

*»  Maule  V.  Crawford,  14  Hun  (N.  T.)  193.  See,  also,  ROBINSON  v. 
BROWN,  4  Blackf.  (Ind.)  128;  Fernon  v.  Farmer,  1  Har.  (Del.)  32;  Yin.ding  v. 
Kohlhass,  18  Md.  148;  Barriere  v.  Nairac,  2  Dall.  249;  Whitwell  v.  Winslow, 
134  Mass.  343;  American  Exch,  Bank  v.  Blanchard,  7  Allen,  333;  Fawsett  v. 
National  Life  Ins.  Co.,  97  111.  11;   Lowy  v.  Andreas,  20  111.  App.  521. 

60  Hill  V.  Lewis,  1  Salk,  132. 

61  66  N.  Y.  18.  See,  also,  CROUCH  v.  CREDIT  FONCIER  OF  ENGLAND, 
L.  R.  8  Q.  B.  374;  HASEY  v.  SUGAR  CO.,  1  Doug.  (Mich.)  193;  Robinson  v. 
Wilkinson,  38  Mich.  299;  Almy  v.  Winslow,  126  Mass.  342;    Grinnell  v.  Baxter. 

17  Pick.   (Mass.)  386;    DAGGETT  v.  DAGGETT,   124   Mass.   149;    .Tudson  v. 
Gookwin,  37  111.  286. 

62  U.  S.  V.  "WTiite,  2  Hill  (N.  Y.)  59;  GIBSON  v.  MINET,  1  H.  BI.  569;  ME- 
CHANICS' BANK  V.  STRAITON,  3  Abb.  Dec  (N.  Y.)  269. 


§  10)  PURPOSE    OF    KEGOTIABILITY.  17 

This  is  probably  the  better  rule,  although  it  was  the  former  English 
rule  that,  unless  a  bill  or  note  be  payable  to  order  or  to  bearer,  it  was 
not  negotiable.  The  interest  of  the  parties  should,  and  probably 
would,  override  the  form  of  words,  and  if  the  court  can  determine 
from  the  words  used  that,  as  a  matter  of  fact,  it  was  the  intention 
of  both  of  the  parties,  the  one  to  assume  the  rights  of  a  holder  of  a 
negotiable  instrument,  and  the  other  to  incur  the  liabilities  of  a 
party  thereto,  and  the  instrument  in  other  essential  respects  con- 
tains the  elements  of  a  negotiable  bill  or  note,  the  instrument  would 
probably  be  treated  as  negotiable  although  formally  incorrect. 


PURPOSE  OF  NEGOTIABILITY. 

10.  Negotiable  bills  and  notes  in  some  respects  play  the 
part  of  money  in  business  affairs.  The  fundamental  pur- 
pose of  negotiability  is  to  endow  them  -with  all  qualities 
necessary  for  a  limited  commercial  medium.^ 

Bills  and  notes  have  become,  under  the  development  which  they 
have  undergone  in  the  courts  of  England  and  America,  a  sort  of  money, 
— a  medium  of  exchange  possessing  the  advantages  of  a  perfectly 
flexible  paper  currency.^*  The  rules  which  the  courts  have  worked 
out  all  point  largely  to  one  end, — the  protection  of  the  bona  fide  holder 
so  far  as  that  is  consistent  with  justice  to  the  other  parties  to  the  in- 
Btrument.  It  is  necessary,  as  we  shall  hereafter  see,  that  the  order  or 
promise  contained  in  a  bill  or  note  should  be  definite,  so  that  the 
person  receiving  it  in  exchange  for  merchandise  or  other  value  may 
know  that  he  is  receiving  a  right  that  is  equivalent  to  value;  that  it 
should  be  for  money  only,  because,  from  a  commercial  as  distinguished 
from  an  economic  standard,  money  is  the  only  thing  in  business  whose 

B8  Illustration  of  the  use  of  a  negotiahle  Instrument  as  a  circulatinj:  modium: 
If  A  and  B  jii('  in  En^lnnd.  and  C  in  Jamaica  he  indebted  to  A  £1.000,  and 
B  be  KoiuK  to  .laniaica,  he  may  pay  A  tills  £1,000  and  talve  a  bill  of  excliange 
drawn  l)y  A  in  Fji^dand  upon  C  in  Jamaica.  B.  on  his  way  to  Jamaica,  may 
he  paid  the  £1.000  for  tiie  bill  l)y  I)  in  Now  York,  and  indorse  it  to  liim;  D 
may  be  paid  for  tlie  bill  £1.000  "by  K  in  riiaileslon.  and  indorse  it  to  him; 
and  E  will  coiiect  the  money  of  C,  to  whom  it  is  presented  for  acceptance. 
In  Jamaica,  and  wlio  accejits  it. 

See  KUSSEI.L  v.  WIIII'I'LE.  2  Cow.  (N.  Y.)  5.30;  Durgin  v.  Bartol,  04  Me. 
473;   GOODWIN  v.  U(JBAIITS,  L.  II.  10  Exch.  337,  Johns.  Cas.  Bills  &  N.  3. 

•*  Bills  of  exctinnge  and  promlssoiy  notes  are  representatives  of  money,  clr- 
NEr;.BlLES.-2 


18         NEGOTIABILITY  80  FAR  A3  IT  RELATES  TO  BILLS  AND  NOTES.       (Ch.    1 

value  does  not  fluctuate.  And  so,  through  the  entire  system,  in  laying 
down  their  rules,  the  courts  have  asked  themselves  these  questions: 
Is  the  application  of  the  rule  just  for  all  parties,  and,  all  things  being 
considered,  the  most  expedient  for  commerce?  And,  second,  is  the 
rale  such  that  a  person  taking  the  bill  or  note  in  exchange  for  some- 
thing of  value  will  be  protected  in  the  enforcement  of  the  bill  or  note, 
as  a  legal  right,  if  it  is  not  paid?  This  idea  once  understood  by  the 
student,  the  scattered  and  seemingly  irrelevant  rules  become  consec- 
utive parts  of  a  consistent  theory. 

Probably  the  primary  object  of  negotiability  is  to  give  to  bills  or 
notes  the  effect  which  money,  in  the  shape  of  government  bills  or 
notes,  plays  in  commercial  transactions.  These  last  are  an  unques- 
tioned medium  of  payment  for  debts,  or  for  the  transfer  of  property 
or  rights.  They  are  such  an  unquestioned  medium  because  the  credit 
or  solvency  of  the  government,  which  has  caused  them  to  be  issued,  is 
behind  them.  It  is  the  distinct  promise  of  a  whole  nation  to  exchange 
for  the  bill  or  note  itself,  in  precious  metal,  a  sum  of  money  intrinsic- 
ally worth  its  face. 

A  man's  credit  is  rated  at  the  amount  of  property  or  valuable  rights 
he  has  or  can  procure.  He  makes  this  credit  available  in  his  bill 
or  note  because  his  credit  is  its  guaranty  of  future  payment.  The 
elements  of  credit  may  be  either  his  earning  capacity  or  the  accumu- 
lated property  he  owns.  Business  men  rely  upon  these  as  the  source 
of  probable  future  payment.  And  so  the  merchant  sells  goods,  and 
the  bank  discounts  for  the  seller  the  buyer's  note  or  draft  And  busi- 
ness men  who  have  no  property  in  cash  are  by  means  of  credit  enabled 
to  conduct  and  carry  to  completion  business  and  commercial  enter- 
prises. Other  business  men  will  take  these  promises  of  men  of  un- 
doubted credit,  and  treat  them  as  cash.  Thus  we  see  bills  and  notes 
going  from  hand  to  hand  in  the  commercial  markets,  and  credit  taking 
the  part  of  money  in  commercial  transactions.  And  here,  perhaps,  as 
a  part  of  this  theory  of  negotiability,  it  is  well  to  show  how  far  and 
under  what  circumstances  courts  have  treated  negotiable  instruments 
an  liquidation  of  indebtedness. 

colatlng  In  the  commercial  world  as  such.  FRIEDLANDER  v.  RAILWAY  CO., 
9  Sup.  Ct.  570,  130  U.  S.  416;  Id..  Johns.  Cas.  Bills  &  N.  11.  For  a  comparison 
of  the  English,  or  banking  or  currency,  theory  of  bills  of  exchange  with  the 
French,  or  mercantile,  theory,  see  Chalm.  Bills  &  N.  (3d  Ed.)  introduction. 


§  11)  PAYMENT    BY    NEGOTIABLE    INSTRUMENT.  19 

PAYMENT  BY  NEGOTIABLE  INSTRUMENT. 

11.  The  common  rules  regarding  a  negotiable  instru- 
ment as  a  medium  of  payment  are  as  follows: 

(a)  Where  a  negotiable  instrument  to  -which  the  debtor 

is  a  party  as  drawer,  acceptor,  maker,  or  in- 
dorser  is  received  for  a  debt,  -whether  precedent 
or  contemporaneous,  in  the  absence  of  agree- 
ment to  the  contrary  a  presumption  arises  in 
most  jurisdictions  that  the  instrument  is  received 
in  conditional,  and  not  in  absolute,  payment. 

(b)  Where  a  negotiable  instrument  to  -which  the  debtor 

is  not  a  party  is  received  for  a  debt,  in  the  ab- 
sence of  agreement  to  the  contrary  a  presump- 
tion arises  in  most  jurisdictions  that  the  instru- 
ment is  received  in  conditional  payment  if  the 
debt  -was  precedent;  but  that  it  is  received  in  ab- 
solute payment  if  the  debt  be  contemporaneous. 

Whether  a  payment  by  bill  or  note  is  absolute  (that  is,  in  extinguish- 
ment of  the  debt)  or  conditional  (that  is,  in  extinguishment  of  the  debt 
only  on  condition  that  the  bill  or  note  be  paid  at  maturity)  is  to  he 
determined  by  the  intention  of  the  parties;  and  if  their  intention  has 
been  expressed,  or  can  be  gathered  from  the  circumstances,  it  will  al- 
ways govern.  But,  in  the  absence  of  agreement,  express  or  implied, 
certain  presumptions  as  to  the  intention  of  the  parties  have  become 
established.  It  is  said  on  high  authority  that  in  refusing  to  hold  that 
acceptance  of  a  bill  or  note,  as  in  case  of  acceptance  of  an  instrument 
under  seal,  works  an  extinguishment  and  merger  of  the  debt  in  the 
new  security,  the  courts  have  failed  to  give  full  effect  to  the  custom  of 
merchants.*"  Certain  it  is  that  for  lack  of  a  guiding  principle  the 
courts  have  been  led  into  hopeless  confusion  in  their  elTorta  to  arrive 
at  the  presumed  intention  of  debtors  and  creditors.  It  is  believed, 
however,  that  the  preponderance,  if  not  the  weight,  of  authority  will 
be  found  to  support  the  rules  stated  in  the  principal  text 

••  2  Ames.  Cas.  Bllla  &  N.  874. 


20  NEGOTIABILITY  SO  FAR  AS  IT  RELATES  TO  BILLS  AND  NOTES.       (Ch.   1 

Proceeding  upon  the  theory  that  bills  and  notes  in  this  respect  are 
not  specialties,  but  simple  contracts,  and  because  a  simple  executory 
contract  is  not  extinguished  by  acceptance  of  another,  it  is  gener- 
ally held  that,  in  the  absence  of  agreement  to  that  effect,  acceptance 
of  a  bill  or  note  of  the  debtor  on  account  of  the  debt  does  not  extin- 
guish it.  Yet  the  taking  of  the  bill  or  note  is  not  without  effect  upon 
the  right  of  the  creditor  to  enforce  his  debt.  His  remedy  for  its  en- 
forcement is  suspended;  but,  if  the  bill  or  note  is  dishonored,  his  right 
to  sue  on  the  original  debt  revives.  In  other  words,  the  presumption 
arises  that  the  payment  is  conditional.''®  So,  where  a  bill  or  note 
of  the  debtor  is  accepted  on  account  of  a  contemporaneous  debt, — as 
upon  a  sale  of  goods, — the  same  presumption,  though  perhaps  with 
even  less  reason,  is  held  to  arise.*''  The  same  rule  prevails  where  the 
debtor  gives  on  account  of  a  precedent  debt  the  bill  or  note  of  a  third 
person,  whether  the  paper  be  indorsed  by  the  debtor  or  be  simply  pay- 
able to  bearer,  and  without  the  debtor's  indorsement.'^*  Where,  how- 
ever, the  debtor  gives  the  bill  or  note  of  a  third  person  on  account  of  a 
contemporaneous  debt,  a  distinction  is  drawn  between  paper  indorsed 
by  the  debtor  and  paper  payable  to  bearer,  or  indorsed  in  blank  by  the 
payee  or  drawee,  but  without  the  indorsement  or  guaranty  of  the 
debtor.  In  the  first  case  the  general  rule  holds  good,  such  paper  being 
regarded  in  the  same  light  as  a  bill  or  note  to  which  the  debtor  was  an 
original  party;  '*"  but  in  the  second  case  the  usual  presumption  is  re- 
versed, and  the  creditor  is  presumed  to  accept  the  paper  in  absolute 

B8  CLARK  v.  MUNDAL,  1  Salk.  124;  Richardson  v,  Rickman,  cited  in  5  Term 
R.  517;  PRICE  v.  PRICE.  16  Mees.  &  W.  2;i2;  Bank  of  United  States  v.  Daniel, 
12  Pet.  32;  Lewis  v.  Davisson,  29  Grat.  2GG;  McLaren  v.  Hall,  26  Iowa,  298; 
Archibald  v.  Argall,  53  111.  307;  Logan  v.  Attix,  7  Iowa,  77;  Jones  v.  Shawhan, 
4  Watts  &  S.  261;  Lee  v.  Green,  83  Ala.  491,  3  South.  785;  McGuire  v.  Bidwell, 
64  Tex.  43;  Henry  v.  Conley,  48  Ark.  271,  33  S.  W.  181;  Hopkins  v.  Detwiler, 
25  W.  Va.  748;  Selby  v.  McCullough,  26  Mo.  App.  67;  Riverside  Iron-Works  v. 
Hall,  64  Mich.  168,  31  N.  W.  152;  Geib  v.  Reynolds,  35  Minn.  331,  28  N.  W. 
923;   Merrick  v.  Boury,  4  Ohio  St.  60;   Cole  v.  Sackett.  1  Hill  (N.  Y.)  516. 

BT  Sheehy  v.  Mandeville,  6  Cranch,  253.     See  Daniel,  Neg.  Inst.  §  1261. 

B8WARD  V.  EVANS,  2  Ld.  Raym.  928;  Ex  parte  BLACKBURN,  10  Ves. 
204;  Downey  v.  Hicks,  14  How.  249;  Gallagher  v.  Roberts.  2  Wash.  C.  C. 
191,  Fed.  Cas.  No.  5,195;  Noel  v.  Murray,  13  N.  Y.  167;  Gordon  v.  Price,  32 
N.  C.  388;  McGinn  v.  Holmes,  2  Watts  (Pa.)  121;  Dougal  v.  Cowles,  5  Day 
(Conn.)  511;   Slocumb  v.  Holmes,  1  How.  (Miss.)  139;   Case  v.  Hall,  5  Mo.  59. 

»»  Monroe  v.  Hoff,  5  Denio  (N.  Y.)  360;   Shriner  v.  Keller,  25  Pa.  St.  61. 


§  11)  PAYMENT    BY    NEGOTIABLE    INSTRUMENT.  21 

payment.'"  "I  am  of  the  opinion,  and  always  was,"  said  Lord  Holt, 
"notwithstanding  the  noise  and  cry  that  it  is  the  use  of  Lombard 
street,  that  the  acceptance  of  such  a  note  [the  note  of  a  third  person, 
payable  to  bearer]  is  not  actual  payment.  Taking  a  note  for  goods 
sold  is  payment,  because  it  was  part  of  the  original  contract;  but 
paper  is  no  payment  where  it  was  a  precedent  debt.  For  when  such 
a  note  is  given  in  payment,  it  is  always  to  be  taken  under  this  condi- 
tion: to  be  payment  if  the  money  be  paid  thereon  in  convenient 
time."  '^  These  various  presumptions,  since  they  rest  on  the  pre- 
sumed inteiitior.  of  the  parties,  may  all  be  rebutted  by  evidence  show- 
ing a  different  intention  on  their  part.  In  some  jurisdictions,  on  the 
other  hand,  the  oidinary  rule  is  reversed,  and,  where  a  promissory 
note  or  bill  of  exchange  is  given  on  account  of  indebtedness,  the  pay- 
ment is  presumed  to  be  absolute,  though  this  presumption  may  be  re- 
butted." 

The  rule  that  a  bill  or  note  is  presumed  to  be  merely  conditional 
payment  is,  of  course,  applicable  where  the  instrument  is  accepted  in 
renewal  of  one  already  due,  which  is  not  surrendered." 

«o  WARD  v.  EVANS.  2  Ld.  Raym.  928,  per  Holt,  C.  J.;  CLARK  v.  MUNDAL, 
1  Salk.  124;  12  Mod.  203;  BANK  OF  ENGLANT)  v.  NEWMAN,  1  Ld.  Raym. 
442;  Whitbeck  v.  Van  Ness,  11  Johns.  (N.  Y.)  409;  Gibson  v.  Tobey,  46  N.  Y. 
€37;    Bicknall  v.  Waterman,  5  R.  L  43. 

«i  WARD  V.  EVANS,  supra. 

«2  Fowler  v.  Bush,  21  Pick.  (Mass.)  230;  Ely  v.  James,  123  Mass.  44;  O'Con- 
ner  v.  Hurley,  147  Mass.  149,  16  N.  E.  764;  Gooding  v.  Morgan,  37  Me.  419; 
Collamer  v.  Langdon,  29  Vt.  32;   Olvey  v.  Jackson,  106  Ind.  286,  4  N.  E.  149. 

88  Bishop  V.  Rowe,  8  Maule  &  S.  362;  Cumber  v.  Wane,  1  Strange,  426; 
Woods  V.  Woods,  127  Mass.  141;  East  River  Bank  v.  Butterworth,  45  Barb. 
478. 


22  OF   NEGOTIABLE    BILLS    AND    NOTES.  (Ch.   2 


CHAPTER  n. 

OF    NEGOTIABLE    BTTXS  AND   NOTES,   AND  THEIR   FORMAL  AND 
ESSENTIAL  REQUISITES. 

12.  Definition  and  Forms  of  Bills  of  Ezchangek 

13.  Definition  and  Form  of  Note. 

14.  Essentials  of  Bill  or  Note. 

15.  Order  Contained  in  Bill. 

16.  Promise  Contained  In  Note. 

17-20.  Certainty  as  to  the  Terms  of  the  Order  or  Promlipe. 

21-25.  Payment  of  Money  Only. 

26^0.  Specification  of  Parties, 

81-33.  Capacity  of  Parties. 

84.  Authority  of  Agent. 

85-37.  Delivery  of  Instruments. 

88.  Date. 

89.  Value  Received. 
40.  Days  of  Grace. 


DEFINITION  AND  FORMS  OF  BILLS  OF  EXCHANGE. 

12.  A  bill  of  exchange  is  an  unconditional  order  in  writ- 
ing upon  one  person  by  another  for  the  payment  of  a  sum 
of  money  absolutely  and  at  all  events.* 

Bills  of  exchange  are  classified  as  foreign  bills  and  in- 
land bills. 

The  following  is  a  common  form  of  foreign  bill  of  exchange  in 
a  Bet: 

Buffalo,  N.  T.,  U.  S.  A..  June  15.  1891. 
Firat.     Exchange  for  London  Q  ^ 

Thirty  days  after  sigllilof  thi^First  of  Exchange  (Second  and 
©  Third  Unpaid)  pay  to  Ke  ord<«-  of  JOHN  SMITH  Five  Hun- 
IQ  dred  Pounds  Sterling,  jjjalue  r^eived,  and  charge  the  same  to 
«        account  of  O  "         THOMAS  IlOBINaOil. 

To  Baring  Bros.  «&  Co.  <j  ^ 

London,  £ng. 

1  This  definition  Is  that  of  Judge  Chalmers  (Bills  &  N.  art.  1).  See  Neg.  Inst 
Ifc  i  210.    The  student  Is  recommended,  however,  to  fix  in  liis  mind  rather  tb» 


5  12)  DEFINITION    AND    FORMS    OF    BILLS    OF    EXCHANGE.  23 

Buffalo,  K  Y.,  U.  S.  A.,  June  15.  1891. 
Becond,     Exchange  for  London. 

Thirty  days  after  sight  of  thfs  Second  of  Exchange  (First  and 
©  Third  Unpaid)  pay  to  the  order  of  JOHN  SMITH  Five  Hua- 
IQ  dred  Pounds  Sterling,  value  received,  and  chnrge  the  same  to 
tfl        account  of  THOMAa  liUliLNbUN. 

To  Baring  Bros.  &  Co., 

London,  Eng; 

Buffalo,  K.  T.,  U.  S.  A.,  June  15.  1891- 
Third.    Exchange  for  London. 

Thirty  days  after  sight  of  this  Third  of  Exchange  (First  and 
©  Becond  Unpaid)  pay  to  the  order  of  JOHN  SMITH  Five  Hun- 
IQ  dred  Pounds  Sterling,  value  received,  and  charge  the  same  to 
«a        account  of  THOMAS  ROBllSbOif. 

To  Baring  Bros.  «S;  Co., 

London,  Eng; 

IThe  following  is  a  usual  form  of  an  inland  bill: 

$500.00.  fZ  tj  Buffalo,  June  15.  189L 

Thirty  days  after  sight  pay  tUJthe  or*  r  of  JOHN  SMITH  Five  Hun- 
dred Dollars,  value  received,  ^d  charo)  to  account  of 

UJ  ^         THOMAS  ROBINSON. 

O 
To  Baring  Bros.  &  Co.,  q  •= 

New  York  CIty.<  ea 

The  parties  to  the  foregoing  bill  are  technically  termed:  (a)  The 
drawer,  or  the  party  who  orders  the  payment  of  the  money  in  the 
bill,  e.  g.  Thomas  Robinson,  (b)  The  drawee  or  the  party  to  whom 
the  order  is  directed,  e.  g.  Baring  Bros,  (c.)  The  acceptor,  or  the 
drawee  when  he  has  assented  to  the  order,  and  thus  become  the 
principal  debtor  on  the  bill,  e.  g.  Baring  Bros,  (d)  The  payee,  or 
the  party  in  whose  favor  the  order  is  made,  e.  g.  John  Smith.  These 
are  the  parties  to  the  bill  in  its  origin.  There  are  also  subsequent 
parties:  (e)  The  holder,  or  the  person  having  legal  possession  of  the 
bill,  who,  when  it  is  negotiable,  may  recover  the  amount  of  the 
same.  This  term  includes  payee,  indorsee,  and  bearer,  (f)  The  in- 
dorser,  or  one  who  directs  the  amount  of  the  bill  to  be  paid  to  a 
person  in  the  indorsement  named,  or  to  his  order  or  to  bearer,     (g) 

statement  of  the  essential  elements  of  bills  as  given  In  section  1-1«  than  tbs 
formulated  definition. 


24  ■     OF    NEGOTIABLE    BILLS    AND    N0TE3.  (Ch.   2 

The  indoi'see,  or  one  who  makes  title  to  the  bill  through  the  Lndorse- 
meut. 

A  bill  or  exchange  is  usually  called  among  business  men  a  "draft." 
"VSlien  duly  accej)ted,  it  is  called  an  "acceptance," 

Under  thb  English  law,  bills  drawn  or  payable  abroad,  or,  until 
quite  recent  times,  drawn  in  England  and  payable  in  Scotland  or 
Ireland,  or  vice  versa,  were  foreign  bills.  Bills  drawn  and  payable 
either  in  England  or  Wales  were  inland  bills.  In  the  United  States 
the  general  rtile  is  that  a  bill  drawn  in  one  state  and  payable  in 
another  is  a  foreign  bill,^  the  theory  being  that  the  several  states, 
retaining  in  themselves  the  power  to  make  local  business  regula- 
tions and  laws,  are  thus  far  separate  and  independent  sovereignties, 
and  to  be  so  viewed  in  the  decision  of  points  involved  in  the  law 
merchant.  Aside  from  these  local  regulations,  the  principal  differ- 
ence in  the  United  States  between  the  foreign  and  inland  bill  is 
that  to  cha^ge  the  drawer  and  indorsers  the  former  on  dishonor  re- 
quires protest  by  a  notary  public,  the  latter  does  not.'  In  the  case 
of  international  foreign  bills,  a  further  usage  of  long  standing  has 
existed,  arising  from  the  diflSculty  of  communication  in  former  times 
between  different  nations  and  the  danger  of  loss  in  transmission. 
It  is  to  diaw  the  bill  in  a  set  of  three  or  four  parts,  each  a  counter- 

s  Hallidap  v.  McDougall,  20  Wend.  81,  22  Wend.  2G4;  COMMERCIAL  BANK 
V.  VARM;M,  49  N.  Y.  2G9;  DICKINS  v.  BEAL,  10  Pet  572;  Bank  of  United 
States  V.  Daniel,  12  Pet.  32;  Phoenix  Banli  v.  Hussey,  12  Picli.  4S3;  Grimshaw 
V.  Bender,  6  Mass.  157;  Barclay  v.  Minchin,  Id.  162.  Unless  the  contrary  ap- 
pears on  the  face  of  the  bill,  it  will  be  deemed  an  Inland  bill.  Where  a  bill 
was  drawn  and  dated  in  Philadelphia,  and  payable  and  delivered  In  London, 
held  that  the  drawer  was  liable  in  damages  to  the  holder  as  on  a  bill  drawn 
arid  (Itlivered  in  Philadelphia.  LENNIG  v.  RALSTON,  23  Pa.  St.  137. 
And  d  bill  dated  and  payable  in  Illinois  was  held,  even  between  the  orig- 
inal tjarties,  an  inland  bill,  though  di'awn  and  delivered  in  Wisconsin,  such 
being  the  agreement  as  shown  by  the  face  of  the  instrument.  Strawbridge 
V.  Robinson,  5  Oilman  (111.)  472.  That  the  bill  was  drawn  or  is  payable  in  an- 
other country  or  state  must  distinctly  appear.  Thus  a  bill  dated  at  Dublin  or 
New  Orleans  would  be  presumed  in  New  York,  in  the  absence  of  proof  to  the 
contrary,  to  be  an  Inland  bill,  the  courts  not  taking  judicial  notice  of  the  divi- 
sions of  foreign  states.  Kearney  v.  King,  2  Barn.  &  Aid.  301;  Riggin  v.  Col- 
lier, 6  Mo.  568;    Yale  v.  Ward's  Ex'r,  30  Tex.  17.     See  Neg.  Inst.  L.  §  213. 

8  Union  Bank  v.  Hyde,  6  Wheat.  572;  BURKE  v.  McKAY,  2  How.  66;  Young 
V.  Bryan,  6  Wheat.  146.  See  collated  cases,  footnote  to  Wood's  Byles,  Bills  & 
N.  p.  261. 


§  13)  DEFINITION    AND    FORM    OF    NOTE.  25 

part  of  the  other,  except  that  in  each  part  of  the  set  is  incorporated 
a  condition  that  that  particular  bill  shall  be  payable  only  provided 
all  the  others  remain  unpaid.  This  condition  operates  as  a  notice  to 
the  acceptor  to  accept  and  pay  but  one  bill,  and  he  and  the  drawer 
are  liable  upon  but  one  bill;  for  it  is  well-settled  law  that  a  pay- 
ment of  one  of  a  set  operates  as  a  discharge  of  the  rest.  The  whole 
set  collectively  is  deemed  to  amount  to  but  one  bill.*  The  rule  that 
a  payee  or  subsequent  indorser,  who  indorses  two  or  more  parts  of 
a  bill  to  separate  indorsees,  is  liable  on  indorsement  to  each  sep- 
arate indorsee  operates  as  a  check  to  the  improper  circulation  of 
the  bill.''  The  transferrer  is  bound  to  pass  over  upon  transfer  all 
parts  of  the  bill  in  his  possession,  and  thus  the  circulation  of  these 
instruments  may  be  effected  with  safety.* 


DEFINITION  AND  FORM  OF  NOTE. 

13.  A  promissory  note  is  an  unconditional  -w^ritten  prom- 
ise, signed  but  not  sealed!  by  the  maker,  to  pay  absolute- 
ly and  at  all  events  a  sum  certain  in  money,  either  to  the 
bearer  or  to  a  person  therein  designated  or  to  his  order.* 

*3  Kent,  Comm.  199;  Wells  v.  Whitehead,  15  Wend.  527;  Durkin  ▼.  Crans- 
ton, 7  Johns.  442.    See  DOWNES  v.  CHURCH,  13  Pet.  205. 

8  HOLDSWORTH  v.  HUNTER,  10  Barn.  &  C.  449.  So,  if  the  drawee  accepts 
more  than  one  part,  he  is  liable  on  each  to  a  bona  fide  holder.     Id. 

•  Pinard  v.  Klockmann,  3  Best  &  S.  388,  32  Law  J.  Q.  B.  82.  See  Neg.  Inst. 
L.  §§  310-315.  I 

t  A  bill  or  note  loses  Its  negotiable  character  If  under  seal.  CLARK  v.  MAN- 
UFACTURING CO.,  15  Wend.  (N.  Y.)  256;  MUSE  v.  DANTZLER,  85  Ala.  361, 
5  South.  178;  BROWN  v.  JORDHAL,  32  Minn.  135,  19  N.  W.  650;  Talbott  v. 
Suit,  68  Md.  443,  13  Atl.  356;  D.  M.  OSBORNE  &  CO.  v.  HUBBARD,  20  Or. 
318,  25  Pac.  1021.  This  rule  has  generally  been  held  inapplicable  to  bills  and 
notes  of  corporations.  Jackson  v.  Myers,  43  Md.  452;  WEEKS  v.  ESLER,  143 
N.  Y.  374,  38  N.  E.  377;  Central  Nat.  Bank  v.  Railroad  Co.,  5  S.  C.  156;  In  re 
Imperial  Land  Co..  L.  R.  11  Eq.  498.  In  some  states  by  statute  the  presence 
of  a  seal  is  declared  to  have  no  effect  on  the  character  of  the  instrument.  See 
Neg.  Inst.  L.  §  25,  subd.  4,  to  this  effect.     See  Rand.  Com.  Paper,  §§  70-74. 

•  Cbalm.  Bills  &  N.  art.  271;  Edw.  Bills  &  N.  §  134;  Byles,  Bills  (Wood's  Ed.) 
p.  41;  Daniel,  Neg.  Inst.  §  28;  Neg.  Inst.  L.  §  320.  Tlie  atudont  is  here  recom- 
mended to  fix  In  his  mind  rather  the  statement  of  the  essential  elements  of  • 
note  tlian  the  formulated  definition. 


26  OF   NEGOTIABLE    BiLI.S    AND    NOTES.  (Ch.    2 

A  common  form  of  note  is: 

ji     $500.00.  Buffalo,  June  15,  1891. 

Thirty  days  after  date  T  promise  to  pay  to  the  order  of  JOHN 
SMITH  Five  Huudred  Dollars,  value  received,  at  Bank  of  Buf- 
falo. THOMAS  ROBINSON. 


>- 


The  parties  to  the  foregoing  note  are  technically  termed: 

(a)  MAKEK — The  person  who  signs  the  note  and  makes  the 

promise;  e.  g.  (Thomas  Robinson.) 

(b)  PAYEE — The  person  in  whose  favor  the  promise  contained 

in  the  note  is  made;  e.  g.  (John  Smith.) 
The  foregoing  are  parties  to  the  note  in  its  origin.     There  are 
also  subsequent  parties.     They  are: , 

(a)  HOLDER — The  person  having  legal  possession  of  the  instru- 

ment, who,  when  it  is  negotiable,  may  recover  the  amount 
of  same.     This  term  includes  payee,  indorsee,  and  bearer. 

(b)  INDORSER — One  who  directs  the  amount  of  the  bill  or  note 

to  be  paid  to  a  person  in  the  indorsement  named,  or  to 
his  order,  or  to  bearer. 

(c)  INDORSEE — One  who  makes  title  to  the  instrument  through 

the  order  specified  in  the  indorsement. 

ESSENTIALS  OF  BILL  OR  NOTE.^ 

14.  To  be  a  negotiable  bill  of  exchange  or  promissory- 
note,  the  instrument  must  have  the  following  essential 
characterir  tics : 

(a)  The  bill  must  contain  an  order. 

(b)  The  note  must  contain  a  promise. 

(c)  The  order  or  promise  must  be  unconditional. 

(d)  It  must  be   an    absolute   order   or  promise  for  the 

payment  of  money  alone. 

(e)  The  amount  of  money  must  be  certain. 

(f)  The  time   of  payment  must   be  a   time   certain    to 

arrive. 

(g)  The  instrument  must  be  specific  as  to  all  its  parties, 
(h)  The  instrument  must  be  delivered. 

•  See  Neg.  Inst  L.  §  20. 


§15)  ORDER    CONTAINED   IN    BILL.  27 


ORDER  CONTAINED  IN  BILL. 

15.  An  order  means  any  form  of  -words  implying  a  right 
on  the  part  of  the  dra-wer  to  command,  and  a  correspond- 
ing duty  on  the  part  of  the  drawee  to  make,  the  paym«>nt 
specified. 

Our  purpose  here  is  to  illustrate  the  difference  between  a  man- 
datory  form  of  words  directing  pnynn^"f  anTTg  mprp  rpqi^psl.     The 


t"heory  of  a  bill  of  exchange  is  that  the  drawer  has  funds  in  the  hands 
of  the  drawee,  which  he  orders  or  directs  to  be  delivered  or  paid  over 
to  the  payee  or  indorsee  of  the  bill.''  Hence,  where  the  instrument  is 
so  written  as  to  show  that  the  drawer  has  or  attempts  to  exercise 
no  right  to  order  the  money  paid,  it  is  not  a  bill  of  exchange.*  To 
determine  whether  or  not  the  instrument  is  so  written  is,  of  course, 
a  question  purely  of  the  construction  of  the  instrument.  Parol  evi- 
dence cannot  be  admitted,  since,  if  the  bill  is  to  operate  as  money, 
the  instrument  must  be  pronounced  to  be  a  bill  or  not  according  to 
its  face.  The  point  to  be  determined  is  whether  the  terms  of  the 
instrument,  on  the  one  hand,  leave  compliance  or  refusal  optional, 
or,  on  the  other  hand,  amount  to  an  imperative  direction.  In  the 
former  case  it  is  a  mere  request;  in  the  latter  it  is  a  demand,  with 
which  the  drawee  must  in  common  honesty  comply,  and  amounts  to 
the  order  which  is  a  necessary  constituent  of  a  bill  of  exchange. 

We  may  perhaps  make  this  distinction  more  clear  if  we  show  it  as 
it  is  laid  down  in  the  cases.  Among  the  earliest  ones  on  the  point 
are  RUFF  v.  WEBB  •  and  LITTLE  v.  SLACKFORD.^'  In  LitUe  v. 
Slackford,  construing  the  words,  "Please  to  let  the  bearer  have  seven 

T  For  a  distinction  between  checks  and  bills  of  exchange,  see  MORRISON  v. 
BAILEY,  5  Ohio  St.  13;  Johns.  Cas.  Bills  &  N.  40.  Certificates  of  deposit  are. 
in  lof,'al  e£fect,  promissory  notes.  TRIPP  v.  CURTENIUS,  3G  Mich.  494;  Johns. 
Cas.  Bills  &  N.  38.  As  holding  a  bank  pass  book  to  be  nonnegotiable,  see  Mc- 
Caskill  V.  Connecticut  Sav.  Bank,  60  Conn.  300,  22  Atl.  5G8;  Johns.  Cas. 
Bills  &  N.  35.  Bills,  of  lading  are  quasi  negotiable  instruments,  transferable 
by  indorsement  and  delivery.  SHAW  v.  RAILROAD  CO.,  101  U.  S.  557; 
Johns.  Cas.  Bills  &  N.  4li. 

•  Edw.  Bills  &  N.  §  187;  Chit.  Bills,  p.  154;   Luff  v.  Pope,  5  Uill,  413. 

•  1  Esp.  129  (before  Lord  Kenyon  in  1794). 

»o  Moody  &  M.  171  (before  Tcuterdeu,  C.  J.,  in  1828). 


28  OB'    NEGOTIABLE    BILLS    AND    NOTES.  (Ch.   2 

pounds,  and  place  it  to  nij  account,  and  jou  will  oblige  your  humble 
servant,  R  Slackford,"  Lord  Tenterden  said:  "The  fair  meaning  is, 
'You  will  oblige  me  by  doing  it.'"  In  Ruff  v.  Webb  the  words  were: 
"Mr.  B  will  much  oblige  Mr.  A  by  paying  C  or  order."  Lord  Kenyon 
said  it  was  a  bill  of  exchange,  because  it  was  an  order  to  pay  mon- 
ey." This  case  is  a  strong  illustration  of  construction  of  words  of 
courtesy  as  importing  an  order,  but  there  was  nothing  in  the  lan- 
guage used  that  could  not  be  explained  on  the  score  of  courtesy.  In 
the  former  case,  on  the  other  hand,  the  woids  "Please  to  let  the  bearer 
have"  amounted  to  a  mere  request  for  a  favor.  As  the  latter  case 
indicates,  the  fact  that  the  order  is  expressed  in  polite  words  does 
not  impair  its  mandatory  effect.  They  may  seem  a  request,  yet  be 
in  fact  an  order.  Indeed,  the  presumption  is  against  their  being  a 
request,  and  the  courts  generally  seek  to  construe  the  instrument  as 
an  order.^'  And,  in  order  to  displace  the  construction  that  the  in- 
strument is  a  bill,  it  would  seem  to  require  that  the  language  nec- 
essarily imported  a  favor,  and  was  not  meant  as  mere  words  of 
civility.*' 

Kor  is  mere  authority  to  pay  equivalent  to  an  order.  Thus,  in 
HAMILTON  V.  SPOTTISWOODE,**  where  the  words  were,  "We 
hereby  authorize  you  to  pay  on  our  account  to  the  order  of  C,"  Baron 
Parke  said:  "Here  is  only  an  option  to  pay  or  not;  therefore  this 
document  is  not  a  bill  of  exchange,  but  only  a  warranty,  in  case  the 
defendant  paid."  *»  And  in  RUSSELL  v.  POWELL,^'  where  J  M 
assigned  to  the  plaintiff  a  share  in  the  estate  of  T  H,  deceased,  in 

•f 

"  See,  also,  ELLISON  v.  COLLINGRIDGE,  9  C.  B.  570,  where  "credit  In 
cash"  was  held  equivalent  to  "pay."  In  KING  v.  ELLOR,  1  Leach,  323.  it 
was  held  that  the  terms  of  the  following  order  did  not  import  any  compulsion 
on  the  part  of  the  drawee  to  pay,  but  was  simply  a  request:  "Please  to  send 
£10  by  the  bearer,  as  I  am  so  ill  I  cannot  wait  upon  you."  An  account,  with  an 
order  accompanying,  from  the  creditor  to  the  debtor,  that  the  latter  should  pay 
the  account  to  O.  &  Sons,  was  held  not  to  be  a  bill.  NORRIS  v.  SOLOMON,  2 
Moody  &  R.  2GG.     But  see  HOYT  v.  LYNCH,  2  Sandf.  (N.  Y.)  328. 

12  story,  Bills  &  N.  §  33;  WHEATLEY  v.  STROBE,  12  Cal.  92;  SPURGIN 
V.  McPHEETERS,  42  Ind.  527. 

18  HOYT  V.  LYNCH,  2  Sandf.  328. 

14  4  Exch.  200. 

18  KING  V.  ELLOR,  1  Leach,  323;  WlUoughby's  Case,  2  East,  P.  C.  582,  936. 

i«  14  Mees.  &  W.  4ia 


§  16)  PROMISE    CONTAINED    IN    NOTE.  29 

the  following  instrument:  "To  the  executors  of  T  H,  deceased — 
Gents:  We  do  hereby  authorize  and  require  you  to  pay  to  Mr.  Geo. 
Powell,  or  his  order,  £250,  being  the  amount  directed  by  the  order  of 
the  29th  of  July  last  [an  order  of  court]  to  be  paid  to  our  order. 
J  M," — it  was  pointed  out  that  the  executors  need  or  need  not  pay 
this  sum,  according  to  the  condition  of  the  estate  in  their  hands,  and 
therefore  this  was  not  a  bill  of  exchange. 

PaOMISE  CONTAINED  IN  NOTE. 

16.  A  promise  means  any  form  of -words  from  -vchich  an 
intent  of  the  maker  to  pay  can  be  construed. 

A  TTTpre  admiasinn  that  a  debt  is  due,  which  can  be  trpf\tpd  on  a   - 
trial  only  aa  so  much  proof  tending  to  establish  a  debt,  is  a  very 
different  thing  from  the  promise  required  for  a  promissory  note.     A-^ 
proraiBSory  note  is  a  new  obligation,  and  not  simply  pvidpncp  nf^n 
old  obligation.     An  acknowledgment  of  indebtedness  is  evidence  of 
an  old  obligation,  but  creates  no  new  obligation. '^^     In  such  terms  as 
"Due  C,  $100,  value  received;"  "I  O  U  |100;"  ^«  "I  acknowledge  the 
■within  note  to  be  just  and  due,"  ** — there  is  no  liability  that  is  new,  as- 
sumed by  the  persons  who  signed  these  instruments.     They  are  mere 
memoranda  relating  to  a  financial  transaction,  without  any  impli 
cation  in  words  of  a  promise  to  pay. 

The  courts  go  to  the  extreme  limit  to  support  a  note  in  finding 
a  promise  to  pay.  Thus,  in  the  words,  "I  do  acknowledge  myself  to 
be  indebted  to  A  in  £50,  to  be  paid  on  demand,"  ^°  the  words  "to  be 

IT  In  the  case  of  HYNE  v.  DEWDNEY,  which  was  for  money  lent.  It  was 
held  that  time  of  payment  should  be  mentioned  in  a  note,  and  that  an  instru- 
ment lacking  such  mention  of  time  was  nothing  more  than  an  acknowled^'uient 
that  the  money  had  been  paid.  21  Law  J.  Q.  B.  278.  To  the  same  effect,  see 
TAYLOR  V.  STEELE,  infra.  By  a  very  recent  decision  in  New  York  the  court 
of  appeals  has  repudiated  this  doctrine,  and  held  that  an  acknowledgment  of  In- 
debtedness Implies  a  promise  to  pay.  HEGEMAN  v.  MOON,  131  N.  Y.  4(52, 
80  N.  E.  487. 

IS  CURRIER  V.  LOCKWOOD,  40  Conn.  349;  GAY  v.  ROOKE,  151  Mass.  115. 
23  N.  E.  835;  FISHER  v.  LESLIE,  1  Esp.  420;  Hyne  v.  Dewdney,  21  Law  J. 
278. 

i»  GRAY  V.  BOWDEN,  23  Pick.  (Mass.)  282. 

20  CASHORNE  v.  DUTTON,  Selw.  N.  P.  329;  KIMBALL  v.  UUNTINGTON. 
10  Wend.  (N.  Y.)  675. 


30  OP    NEGOTIABLE    BILLS    AND    NOTES.  (Ch.  2 

paid''  were  deemed  a  promise  to  pay;  and  the  words,  **I  O  U  £20,  to 
be  paid  on  the  22d  inst.,"  were  held  to  import  a  promise  for  a  similar 
reason."  So  the  words  "John  Mason,  14th  Feb.,  1836,  borrowed  of 
Ann  Mason,  his  sister,  the  sum  of  £14  in  cash  as  per  loan,  in  promise 
of  payment  of  which  I  am  truly  thankful  for,  and  shall  never  be  for- 
gotten by  me,  John  Mason,  your  affectionate  brother,"  were  held  to 
constitute  a  promise,^^  because  they  expressly  stated  an  advance  of  a 
loan  of  money,  which  the  court  thought  was  impliedly  undertaken  to 
be  paid.  The  expressions  of  gratitude  were  in  this  case  treated 
as  mere  redundancy.  In  the  expression:  "Good  to  C,  or  order,  for 
$30,  borrowed  money," ''  the  words  of  negotiability  necessarily  im- 
ported a  promise.  So,  also,  the  expression,  "Due  A,  |94,  on  de- 
mand," because  the  words  "on  demand"  can  only  be  of  meaning 
with  the  words  "to  be  paid"  inserted,^*  In  some  jurisdictions  there 
are,  it  is  true,  decisions  holding  that  the  word  "due"  imports  such  a 
promise;  "  and  in  other  jurisdictions,  decisions  treating  duebills  as 
promissory  notes.  But  this  is  against  the  weight  of  authority,  and 
not  to  be  supported  on  principle.  The  true  question  before  the 
court  in  construction  should  be  the  intention  of  the  signer,  to  be 
gathered  from  any  form  of  words  in  the  instrument  itself,  to  as- 
sume and  pay  as  a  distinctly  new  obligation. ^^ 

21  BROOKS  V.  ELKINS,  2  Mees.  &  W.  74. 

t2  ELLIS  V.  MASON,  7  Dowl.  598. 

"  FRANKLIN  v.  MARCH.  6  N.  H.  364.  A  promise  "to  be  accountable"  to 
M.  "or  order"  held  sufficient.  MORRIS  v.  LEE,  1  Strange,  629,  So  of  the 
words  "Due  L  R,  or  bearer,  one  day  from  date,  $200."  RUSSELL  v.  WHIP- 
PLE, 2  Cow.  (N.  Y.)  536.  An  instrument  containing  an  order  to  credit  P,  or 
order,  In  cash,  was  held  a  bill.  ELLISON  v.  COLLINGRIDGE,  9  C.  B.  570. 
See,  also.  Schmitz  v.  Mining  Co.,  8  S.  D.  544,  67  N.  W.  618;  HUSSEY  v.  WINS- 
LOW,  59  Me.  170. 

24  SMITH  V.  ALLEN,  5  Day  (Conn.)  337.  In  this  case,  which  was  an  action 
of  assumpsit  on  the  following  instrument:  "Due  John  Allen  94  dollars,  91  cents, 
on  demand," — it  was  held  that  the  words  "on  demand,"  following  an  acknowl- 
edgment of  debt,  and  signed  by  the  debtor,  import  such  a  promise  to  pay  as 
to  constitute  the  writing  a  note. 

26  JACQUIN  V.  WARREN.  40  111.  459;  Anderson  v.  Pearce,  36  Ark.  293;  ST. 
LOUIS,  I,  M.  &  S.  RY.  CO.  v.  BANK.  47  Ark.  545,  1  S.  W.  704;  BRADY  v. 
CHANDLER,  31  Mo.  28;   LEE  v.  BALCOM,  9  Colo.  216,  11  Pac.  74. 

2«  In  BLOCK  V.  BELL  an  instrument  which  ran,  "On  demand,  I  promise  to 
pay  A.  B.,  or  bearer,  the  sum  of  £15,  for  value  received,"  was  not  signed  at  the 


§  17)       CERTAINTY  AS  TO  TERMS  OF  ORDER  OR  PROMISE.  31 

A  consideration  of  the  decisions  from  which  the  foregoing  in- 
stances are  taken  will  clearly  outline  the  theory  that  I  O  U's  or  ac- 
knowledgments of  indebtedness  cannot  be  made  the  foundations  of 
commercial  instruments.  They  can  only  be  classified  in  law  as  ad- 
missions, and  have  weight  as  evidence.*' 

A' 

CERTAINTT  AS  TO  THE  TERMS  OF  T^E  ORDER  OR 

PROMISE. 

17.  A  bill  or  note  must  be  payable  absolutely  and  at  a 
time  certain.^ 

EXCEPTIONS— (a)  If  the  instrument  be  payable  upon 
tbe  happening  of  an  event  -which  is  certain  to 
happen,  though  the  time  "when  it  -will  happen 
be  uncertain,  the  instrument  is  negotiable. 

foot,  but  was  addressed  In  the  margin  to  B.,  who  wrote  across  It  "Acpepted." 
with  his  signature.  It  was  held  that  the  signature  acted  as  an  adoption  of  tlie 
promise,  and  that  the  instrument  was  a  promissory  note.  1  Moody  &  R.  140. 
See,  also,  PETO  v.  REYNOLDS,  9  Exch.  410.  An  order  without  drawee,  how- 
ever, is  not  only  incomplete  as  a  bill,  but  for  want  of  a  promise  is  insufficient 
as  a  note.  FORWARD  v.  THOMPSON,  12  U.  C.  Q.  B.  103.  But  see  AI.MY  v. 
WINSLOW,  126  Mass.  342.  In  TAYLOR  v.  STEELE  an  action  w:is  lirou^Mit  on 
the  following  Instrument:  "Received  from  Mrs.  Barliara  Taylor  the  siun  of 
£170,  for  value  received,  for  which  I  promise  to  pay  at  the  rate  of  £5  pt'r  cent, 
from  the  above  date."  The  following  opinion  was  delivered  by  Parl<e,  B.: 
"This  document  is  not  a  promissory  note,  because  it  contains  no  promise  to 
pay  the  principal,  but  only  the  interest.  ♦  *  *  I  agree  that  an  actual  prom- 
ise is  not  necessary  If  there  are  words  in  the  instrument  from  wliich  a  promise 
to  pay  can  be  collected."  16  Mees.  &  \V.  (LS47)  6(!5.  A  certificate  of  deposit 
payable  to  order  after  a  certain  time,  with  interest,  is  held  to  be  a  negotialde 
promissory  note.  MILLER  v.  AUSTEN,  13  IIow.  218;  BANK  OF  ORLEANS  v. 
MERRILL,  2  Hill  (N.  Y.)  295.  In  an  action  of  assumpsit  on  the  following  In- 
strument: "Due  A.  &  B.  $17.14.  Value  received.  X.  Y.,"— the  doctrine  laid 
down  in  Smith  v.  Allen,  supra,  was  followed,  and  it  was  held  that  the  words 
"value  received"  were  not  equivalent  to  "on  demand,"  and  that,  to  constitute 
an  instrument  a  promissory  note,  there  must  be  an  express,  as  distinguished 
from  an  Implied,  promise.     CTIRRIER  v.  LOCKWOOD,  40  Conn.  349. 

87  FISHER  V.  LESLIE,  1  Esp.  420. 

28  A  promissory  note  payable  "on  or  before"  a  day  named  Is  certain  as  to 
time,  and  is  negotiable.  MATTISO.N  v.  MARKS,  31  Mich.  421;  Johua.  Ca». 
Bills  &  N.  22.    See,  also,  note  43,  post 


82  OF    NKGOTIABLE    BILLS    AND    NOTES.  (Cll.   2 

(b)  Bills  and   notes   are  subject  to  the  implied  condi- 
tions of  presentment  and  notice  of  dishonor. 

18.  The  instrument  must  not  be  payable   out   of  any- 

particular  fund. 
DISTINCTION — Indicating  to   a  drawee  a   source   or 
fund  out  of  ■which  he  may  be  reimbursed  is  not 
charging  payment  upon  a  particular  fund. 

19.  The  following  are  absolute  promises  to  pay  money, 
and  are  negotiable  instruments: 

Instruments  payable 

(a)  On  demand,  or 

(b)  At  sight,  or  on  a  fixed  period   after  sight,  or  one 

in  which  no  time  is  expressed,  w^hich  is  equiva- 
lent to  an  instrument  payable  on  demand. 

20.  An  instrument  payable  in  installments,  even  though 
it  provides  that  upon  non-payment  of  an  installment  the 
whole  becomes  due,  is  a  negotiable  instrument. 

Certainty  in   General. 

Our  purpose  here  is  to  explain  why  a  negotiable  instrument  can- 
not be  conditional  in  its  terms,  but  must  be  absolute  upon  its  face.^' 

2»  It  Is  a  necessary  quality  of  negotiable  paper  that  It  should  be  simple,  cer- 
tain, unconditional,  and  not  subject  to  any  contingencies.  CITIZENS'  NAT. 
BANK  V.  PIOLLET,  126  Pa.  St.  194,  17  Atl.  603;  Johns.  Cas.  Bills  &  N.  18. 
To  the  same  effect,  see  SMITH  v.  BOHEME,  Gilb.  Ch.  93.  A  note  payable  to  A. 
or  order  "on  demand,  on  the  return  of  this  certificate,  and  my  guarantee  of  his 
note  to  his  brother,"  was  held  not  to  be  good,  as  its  payment  depended  upon 
the  happening  of  a  contingency.  SMILIE  v.  STEVENS,  39  Vt.  315.  In  WHITE 
V.  GUSHING,  88  Me.  339,  34  Atl.  164,  an  order  addressed  to  a  savings  bank,  in 

form  "Pay  L  or  order  $120,  and  charge  to  my  account  on  book  No. ,"  and 

containing  on  Its  face  below  the  signature  the  words,  "The  bank  book  of  the  de- 
positor must  accompany  this  order."  was  held  not  negotiable,  because  payable 
only  on  production  of  the  book.  See,  also,  Iron  City  Nat.  Bank  v.  McCord,  139 
Pa.  St.  52,  21  AtL  143.  In  ALEXANDER  v.  THOMAS  an  order  to  pay  "90  days 
after  sight,  or  when  realized."  etc.  (meaning  when  in  funds  for  the  purpose), 
was  held  to  be  dependent  on  a  contingency  which  might  never  happen,  and 
therefore  not  a  good  bill.  16  Q.  B.  333.  A  promise  to  pay  "In  ly^  yrs.  or  soon- 
er, at  the  option  of  the  mortgagor,  •  •  *  with  interest  to  be  paid  during 
said  term  and  for  such  further  time  as  said  principal  sum  or  any  part  thereof 


§§  17-20)       CERTAINTY    AS    TO    TERMS    OF    ORDER    OR    PROMISE.  33 

Generally  speaking,  certainty  is  one  of  the  first  essentials  of  a 
circulating  medimn.  If  conditions  written  upon  the  face  of  nego- 
tiable instruments  were  to  be  permitted,  then  every  holder  would 
necessarily  be  charged  with  notice  of  the  conditions.  And  to  be  in 
a  position  to  assert  his  equities,  he  would  be  bound  to  show  that  he 
had  used  all  diligence  to  ascertain  whether  the  condition  had  been 
fulfilled.  And,  the  very  essence  of  business  paper  being  that  it 
shall  pass  freely  from  hand  to  hand,  to  allow  such  an  ingredient  in 
the  theory  of  negotiability  would  be  an  absurdity. 

In  the  leading  case  of  GIBSON  v.  MINET,^'"'  the  theory  is  ex- 
plained thus:  "The  title  of  a  bearer  is  self-evident.  The  title  of  an 
indorsee  appears  by  the  indorsement  itself.  Everything  which  is 
necessary  to  be  known  in  order  that  it  may  be  seen  whether  a  writ- 
ing is  a  bill  cf  exchange,  and  as  such,  by  the  custom  of  merchants, 
partakes  of  the  nature  of  a  specialty,  and  creates  a  debt  or  duty  by 
its  own  proper  force,  appears  at  once  by  inspection  of  the  writing. 
The  wit  of  man  cannot  devise  anything  better  calculated  for  circu- 
latioTu  The  value  of  the  writing,  the  assignable  quality  of  it,  the 
particular^  mod^  of  assigning  it,  are  created  and  determined  in  the 
original  framo  and  corstitution  of  the  instrument  itself;  and  the 
party  to  whom  the  bill  of  exchange  is  tendered  has  only  to  read  it, 
need  look  no  further,  and  has  nothing  to  do  with  any  private  history 
that  may  belong  to  it.  The  policy  which  instituted  this  simple  in- 
strument demands  that  the  simplicity  of  it  should  be  protected,  and 
that  it  should  never  be  entangled  in  the  infinitely  complicated  trans- 
actions of  particular  individuals  into  whose  hands  it  may  come.** 

Illustration  of  Uncertainty  as  to  Event. 

Some  of  the  instances  of  the  rule  requiring  certainty,  commonly 
cited,  and  important  to  mention  because  of  the  distinction  which  is 
drawn  with  regard  to  them,  are  that  class_fll  f>idpisi  nnd  pmtnJHpH 
whnrgjt  '«  iinpprfnin  frnm  thp  inspf^ction  of  the  instrument  that  th(i^ 

shall  remain  unpaid,"  was  held  not  to  be  a  good  note,  by  reason  of  Its  not  being 
a  promise  to  pay  a  fixed  sum  of  money  at  a  definite  time.  STULTS  v.  SILVA,  ll'J 
Mass.  137.  See,  also.  Way  v.  Smith,  111  Mass.  523;  Sloan  v.  MeCarty,  131  Mass. 
245;  Baird  v.  Underwood,  74  III.  17G;  Meyers  v.  Phillips.  72  111.  4G0;  Smeutek 
V.  Connhaiiser,  17  111.  A  pp.  2(;f!;  FLEUKY  v.  TUFIS,  25  IIL  App.  101;  TOST 
V.  RAILWAY  CO.,  171  Pa.  St.  G15,  33  AtL  3G2. 
•0  1  n.  lil.  (;i8. 

NEG.B1LLS.-3 


3-4  OF    NEGOTIABLE    BILLS    AND    NOTES.  (Cll.   2 

day  or  event  of  payment  is  ever  to  arrive.**  The  case  of  BEAKDES- 
LEY  V.T5ALDWIN  "  is  an  example:  That  was  a  promise  to  pay 
money  so  many  days  "after  the  defendant  should  marry."  This  is 
briefly  reported  as  not  being  negotiable  within  the  statute.  Another 
instance  is  BRAHAM  v.  BUBB/'  which  was  a  promise  to  pay  "four 
years  after  date,  if  I  am  then  living."  Abbott,  C.  J.,  said:  "It  is 
contingent  whether  the  note  will  ever  be  payable,  for,  if  the  maker 
should  die  within  the  four  years,  no  payment  is  to  be  made."  '* 
These  will  perhaps  suflice  to  illustrate  the  point  that  such  instru- 
ments contain  a  promise  so  indefinite  that,  for  business  purposes,  it 
hardly  amounts  to  a  promise  at  all.'"    It  can  certainly  have  no  defi- 

»i  See  Neg.  Inst.  L.  §  23. 

82  2  Strange,  1151. 

88  MS.  Trin.  Term,  1826,  Middlesex  (cited  In  Chltty,  Bills,  *135,  note). 

84  RICHARDSON  V.  MARTYR,  25  Law  T.  64;  De  Wald's  Estate,  13  Phlla. 
(Pa.)  251. 

8  5  In  RICHARDSON  v.  MARTYR  It  was  held  that,  where  demand  on  a  note 
must  be  made  dm-ing  the  lifetime  of  the  payee,  the  imdertaliing  was  conditional, 
and  did  not,  therefore,  constitute  a  promissory  note.  25  Law  T.  64.  Where  a 
note  was  given  on  a  condition  that,  should  a  dispute  arise  between  certain 
parties  about  the  subject  for  which  the  note  was  given,  said  note  should  be 
void.  It  was  held  that  the  Instrument  was  not  negotiable,  since  the  party  taliing 
was  compelled  to  inquire  as  to  an  extrinsic  fact,  and  therefore  took  only  a 
contingent  benefit.  HARTLEY  v.  WILKINSON,  4  Maule  &  S.  25.  Where  the 
words  were,  "I  undertake  to  pay  to  R  J  the  sum  of  £6  for  a  suit  of  clothes 
ordered  by  D  P,"  it  was  held  that  the  promise  was  to  pay  for  the  goods  only 
If  supplied,  and  hence  that  the  instrument  was  not  a  note.  JARVIS  v.  WIL- 
KIN'S, 7  Mees.  &  W.  410.  On  the  other  hand,  in  an  action  on  a  note  given  "in 
consideration  of  foregoing  and  forbearing  an  action  at  law  *  *  ♦  for  dam- 
ages ascertained  *  •  *,"  It  was  held  that,  as  it  appeared  on  its  face  that 
the  consideration  was  executed,  the  note  was  payable  in  all  events,  and  the 
promise  was  sufl3cient  Shenton  v.  James,  5  Q.  B.  199.  A  written  promise  to 
pay  a  certain  amount  of  money  as  soon  as  K.  shall  come  of  age  was  held  not 
to  constitute  a  promissory  note,  and  this,  too,  regardless  of  the  fact  that  K.  did 
In  fact  attain  his  majority.  KELLEY  v.  HEMMINGWAY,  13  111.  604.  In 
an  action  upon  an  order  payable  If  terms  mentioned  In  letters  of  the  drawer 
sboold  be  complied  with,  it  was  held  that  there  could  be  no  recovery,  although 
by  the  acceptance  a  compliance  was  admitted.  The  writing  was  not  a  bill 
when  drawn,  by  reason  of  the  contingency,  and  could  not  subsequently  become 
so.  KINGSTON  V.  LONG,  4  DOUG.  9;  Bayley,  Bills  (6th  Ed.)  16.  In  AP- 
PLEBY V.  BIDDOLPH— an  action  on  a  note  In  these  words:  "I  promise  to 
pay    •    •    •    IT  my  brother  doth  not  pay  It  within  such  a  time"— judgment 


§§  17-20)   CERTAINTY  AS  TO  TERMS  OF  ORDER  OR  PROMISE.         35 

nite  value.  Hence  the  reason  of  the  rule  that  such  instruments  are 
non-negotiable,  because  uncertain.  It  would  be  unwise,  from  a  busi- 
ness point  of  view,  to  allow  such  conditions  to  be  incorporated  in 
instruments  which  are  to  serve  as  a  circulating  medium,^' 

Certainty  as  to  Events   Uncertainty  as  to  Time. 

The  rule  laid  down  by  the  courts  that  no  order  or  promise  from 
the  terms  of  which  it  is  manifestly  uncertain  that  thp  mnnoy  win 
ever  be  paid  can  be  a  negotiable  instrument,  is  undoubtedly  wise. 
As  much  cannot  be  said  for  the  rule  laid  down  in  contradistinction 
to  it,  in  another  aspect  of  this  same  point.  Where  the  time  of  pay- 
ment is  certain  to  arrive,  although  the  precise  time  be  uncertain^  the 
courts  consider  the  element  of  upcprtninty  whinh  doflrnyn  nog<»^ia- 
hijity  to  he  plimina^^HJ-.^^  This  rule  originated  in  two  cases,  fol- 
lowed in  other  jurisdictions,  but  of  doubtful  authority  to-day  in  Eng- 
land, the  jurisdiction  of  their  origin.'®  These  cases  are  ANDREWS 
v.  FRANKLIN  »»  and  COLEHAN  v.  COOKE.*"  The  instrument  in 
ANDREWS  V.  FRANKLIN  was  a  promise  to  pay  within  two  months 
after  a  certain  ship  was  paid  off,  and  was  held  to  be  negotiable  as 
a  note  because  paying  off  the  ship  was  a  thing  of  a  public  nature, 
and  certain  to  arrive.  In  COLEHAN  v.  COOKE  the  instrument  was 
a  promise  to  pay  ten  days  after  the  death  of  the  maker's  father, — 
an  event  also  certain  to  arrive.  In  this  last  case  Lord  Chief  Justice 
Willes  said:     That  a  note,  to  be  within  the  statute  of  Anne,  need  be 

was  arrested  after  verdict  on  the  ground  that  the  drawer  might  be  the  debtor 
only  upon  a  contingency.  Cited  in  8  Mod.  3G3.  A  note  containing  a  memo- 
randum that  "it  is  the  understanding  it  will  be  renewed  at  niimn-ity,"  since 
the  obligation  depended  on  whether  the  maker  chose  to  pay  or  give  a  new  note, 
held  not  negotiable.    Citizens'  Nat.  Banli  v.  Piollet,  12G  Pa.  St.  104,  17  Atl.  (iiW. 

86  Corbett  v.  State,  24  Ga.  287;  HUSBAND  v.  EPLING.  81  111.  172;  PEAR- 
SON V.  GARRETT,  4  Mod.  242;  PALMER  v.  PRATT,  2  Bing.  185;  COOLIDUB 
V.  RUGGLES,  15  Mass.  387;  DE  FOREST  v.  FRARY.  6  Cow.  (N.  Y.)  1.^51; 
Grant  v.  Wood,  12  Gray  (Mass.)  220;  Sloan  v.  McCarty,  134  Mass.  245; 
BROOKS  V.  HARGREAVES,  21  Mich.  255. 

87  See  Neg,  Inst.  L.  §  23. 

88  See  2  Ames,  Cas.  Bills  &  N.  831,  citing  ALEXANDER  v,  THOMAS.  IG  Q. 
B.  333,  and  MACARlTiUR  v.  FULLARTON,  Mor.  Diet.  1403. 

8»  1  Strange,  24. 

«o  Wiilps,  303.  "After  my  death  date"  held  a  time  certain.  SHAW  T. 
CAMP,  100  111.  425,  43  N.  E.  G08;   Crlder  v.  Shelby  (G  O.)  95  Fed.  212. 


36  OF    NEGOTIABLE    BILLS    AND    NOTES.  (,Ch.    2 

only  an  express  promise  to  pay  to  another  or  his  order,  or  to  bearer, 
'Hbut  as  to  the  time  of  payment,  the  act  is  silent";  that  there  was 
no  limited  time  beyond  which  if  bills  of  exchange  were  made  pay- 
able they  were  not  good;  and  that  "if  a  bill  of  exchange  be  made 
payable  at  never  so  distant  a  day,  if  it  be  a  day  that  must  come,  it 
is  no  objection  to  the  bill,"  This  is  probably  the  generally  accepted 
doctrine  at  the  present  day.  Says  Judge  Pierpoint  in  CAI^RON  v. 
CAPRON:  *^  "As  long  as  the  payment  is  certain,  and  the  uncertain- 
ty is  only  as  to  the  length  of  time  to  be  given,  this  uncertainty  the 
law  makes  certain  by  giving  a  reasonable  time  after  the  time  pre- 
scribed to  make  payment."  This  decision  was  rendered  upon  a  note 
in  terms:  "I  promise  to  pay  A  B,  or  bearer,  |75,  one  year  from  date, 
with  interest  annually;  and,  if  there  is  not  enough  realized  by  good 
management  in  one  year,  to  have  more  time  to  pay."  So  in  COTA 
V.  BUCK,**  a  note  to  be  paid  "in  the  course  of  the  season  now  com- 
ing" was  negotiable  because  the  date  of  payment  must  come  by  mere 
lapse  of  time.**  Professor  Ames  makes  a  most  apposite  criticism  of 
the  foregoing  rule.  "Nothing,"  says  he,  "could  be  more  inconsistent 
with  the  negotiability  of  a  bill  or  note  than  that  the  holder  should 
have  to  be  continually  on  the  alert  to  ascertain  the  precise  day  when 

*i  44  Vt.  412.  In  the  case  of  SMITHERS  v.  JUNKER  It  was  held  that  a 
note  made  payable  at  the  convenience  of  the  maker,  in  the  following  language: 
"For  value  received,  I  promise  to  pay  to  S.  F.  S.  $2,048.25,  payable  at  my  con- 
venience, upon  this  express  condition:  that  I  am  to  be  the  sole  judLro  of  such 
convenience  and  time  of  payment,"— Is  payable  within  a  reasonable  time.  41 
Fed.  101;  Johns.  Cas.  Bills  &  N.  21.  A  note  to  become  due  at  maker's  death 
held  not  Invalid.     Beatty's  Estate  v.  Western  College,  177  111.  280,  52  N.  E.  432. 

*2  7  Mete.  (Mass.)  588.  But  see  MILLER  v.  POAGE,  56  Iowa,  9G,  8  N.  W. 
799,  where  an  order  in  the  following  form:  "One  year  after  date  I  promise  to 
pay  to  A  or  order  $100.  •  •  •  If  this  agent  does  not  sell  enough  In  one 
year,  one  more  is  granted,"— was  held  not  negotiable.  The  court  construed  the 
note  as  payable  only  out  of  a  particular  fund  until  expiration  of  two  years, 
and  nonnegotiable,  because  not  negotiable  when  issued, 

48  WORKS  V.  HERSHEY,  35  Iowa,  340;  Goodloe  v,  Taylor,  10  N.  C.  458; 
Kiskadden  v.  Allen,  7  Colo.  206,  3  Pac.  221;  MATTISON  v,  MARKS,  31  Mich. 
421;  First  Nat  Bank  v,  Skeen,  29  Mo,  App.  119;  ERNST  v.  STECKMAN,  74 
Pa.  St.  13;  WALKER  v.  WOOLLEN,  54  Ind.  164.  In  the  case  of  JORDAN 
V.  TATE  It  was  held  that  "the  negotiable  character  of  a  promissory  note  Is 
not  afifected  by  the  fact  that  It  was  made  payable,  by  its  terms,  on  or  before 
a  future  day  therein  named."  19  Ohio  St.  586;  Beatty's  Estate  v.  Western 
College,  177  111,  280,  52  N.  E.  432.    But  see  STULTS  v.  SILVA,  supra,  note  29. 


§§  17-20)       CERTAINTY    AS    TO    TERMS    OF    ORDER    OH    PROMISE.  37 

they  should  become  payable,  in  order  to  charge  the  drawer  or  in- 
dorser.  Furthermore,  it  is  impossible  to  attach  a  definite  value  to 
anything  so  speculative  in  its  nature  as  an  obligation  payable,  as  in 
Colehan  v.  Cooke,  so  many  days  after  the  death  of  J  S."  ** 

Payment  out  of  Particular  Fund. 

There  is  another  class  of  common  business  instruments  which  the 
courts  have  deemed  obnoxious  to  the  rule  requiring  bills  and  notes 
to  be  payable  absolutely.  They  are  those  where  a  person,  for  value, 
has  sought  to  transfer  some  particular  property  or  right  by  an  in- 
strument which  has  much  the  form  of  a  bill  or  note.  They  empower 
the  payee  to  collect  moneys  of  the  drawer  or  maker,  which  are  com- 
ing from  some  particular  fund  or  source.  They  are  not  orders  or 
promises  to  pay  in  any  event.*''  Thus  in  JENKEY  v.  HERLE  **  the 
court  said:  "It  would  be  very  mischievous  to  make  such  notes  as 
these,  which  are  but  appointments,  bills  of  exchange;  for,  at  that 
rate,  if  a  tradesman  applies  to  a  gentleman  for  money  for  his  bill, 
says  ths  gentleman,  'I  will  direct  my  steward  to  pay  you,'  and  writes 
to  Mm,  'Pay  to  J.  S.  the  money  mentioned  in  this  bill  out  of  the  rents 
in  your  hands.'  The  steward  has  no  rents  in  his  hands.  It  can 
nevoi'  be  imagined  the  gentleman  should  be  liable  to  be  sued  upon 
this  as  upon  a  bill  of  exchange."  And  the  court  accordingly  refused 
to  ccrisider  the  instrument  before  them  a  bill  of  exchange,  and  con- 
sideretl  it  a  'T^are  appointment  to  pay  money  out  of  a  particular 
funa."  Tho  mouern  doctrine  is  the  same.  In  MUNGER  v.  SHAN- 
NON *'  the  question  was  concerning  this  instrument:  "ilr.  Shan- 
non: Yoa  will  please  pay  to  W.  &  H.  the  amount  of  $2,000,  and 
deduct  the  same  from  my  share  of  profits  of  our  partnership."  This 
was  formally  accepted.  Dwight,  C,  said  of  this:  "  "A  bill  must  be 
drawn  on  the  general  credit  of  the  drawer,  though  it  is  no  objec- 

«4  2  Ames,  Cas.  Bills  &  N.  p.  831. 

46  See  Neg.  Inst.  L.  §  22. 

4«  2  Ld.  Raym.  13G1.  and  see  DAWKES  v.  LORD  DB  LORANE,  3  WIls.  207, 
2  W.  Bl.  782;  CARLOS  v.  FANCOURT,  5  Term  R.  482;  Grlfflu  v.  Wi-atherby. 
L.  R.  3  Q.  B.  753;  Morton  v.  Naylor,  1  Hill.  583;  Gallery  v.  PrlntUe.  14  Barb. 
180;  Wadllngton  v.  Covert,  51  Miss.  U31;  Bayerque  v.  City  of  San  Krauclsco. 
1  McAU.  175,  Fed.  Caa.  No.  1,137. 

47  01  N.  Y.  25L 
4»  Gl  N.  Y.  255. 


88  OP   NEGOTIABLE    BILLS    AND    NOTKS.  (Ch.   2 

tion,  when  so  drawn,  that  a  particular  fund  is  specified  from  which 
the  drawee  is  reimbursed.  The  true  testis  whether  the  drawee  t» 
confined  to  the  particular  fund,  or  whether,  thoug^h  a_parli£jilar_fund 
is  mentioned,  the  drawee  may  charge  thp  hill  np  in  thp  gpnet'al  "jl- 
count  of  the  drawer  if  the  designated  f und  turiL-wit  40-be-iiisiiffi- 
cient.  It  must  appear  that  the  bill  of  exchange  is  drawn  on  the 
general  credit  of  the  drawer.**  Tt  must  mrry  ^'^h  it  tb*^  p^^r^ftr*^^ 
credit  of  the  draw^er,  not  confined  to  any  fund.  It  is  upon  the  credit 
of  a  person's  hand  as  on  the  hand  of  the  drawer,  the  indorser,  or  the 
person  who  negotiates  it."  Instances  of  the  above  principle  are  an 
order  of  A  upon  B  to  pay  a  certain  sum  in  the  words  "on  account 
of  brick  work  done,"  '*°  or  "out  of  money  in  his  hands  belonging  to 
me,"  '^  or  when  the  paper  was  expressed  as  payable  "for  value  re- 
ceived in  stock  ale  brewing  vessels,"  ''^  or  "out  of  the  rents,"  "*  or 
"out  of  growing  substance,"  "*  or  "out  of  the  net  proceeds  of  certain 
ore,"  ""^  or  "out  of  a  certain  claim."  "  Thus  a  negotiable  instru- 
ment must  be  guarantied  by  the  whole  credit  of  the  parties.  It  is  to 
be  their  note  of  hand.  It  must  be  their  promise  to  pay  absolutely 
and  at  all  events.'^     The  instruments  we  have  mentioned  would  be 

*»  DAWKES  V.  LORD  DB  LORANB,  3  Wils.  213;  JOSSELYN  v.  LACIER, 
10  Mod.  294. 

•0  Pitman  v.  Breckenrldge,  3  Grat.  127. 

»i  AVERETT  V.  BOOKER.  15  Grat.  (Va.)  165. 

"  CLARKE  V.  PERCIVAL,  2  Barn.  &  Adol.  660. 

•»  1  Pars.  Bills  &  N.  43. 

B*  JOSSELYN  V.  LACIER,  supra. 

»B  Thus  It  was  held  that  a  written  promise  to  pay  a  certain  amount  at  a 
time  agreed  upon,  the  means  of  payment  to  be  derived  from  ores  which  were 
to  be  dug  subsequent  to  the  promise,  did  not  comply  with  the  requisites  of  a 
promissory  note.  There  is  in  such  an  agreement  a  want  of  that  certainty 
of  payment  necessary  in  a  negotiable  instrument,  WORDEN  v.  DODGE,  4 
Denio  (N.  Y.)  159. 

6«  BRILL  V.  TUTTLE,  81  N.  Y.  457;  Ehrichs  v.  De  MiU,  75  N.  Y.  371,  and 
list  of  authorities  collated,  1  Ames,  Bills  &  N.,  note  p.  29. 

B7  In  an  action  on  a  promise  to  pay,  where  there  was  certainty  as  to  payor, 
payee,  and  amount  and  date.  It  was  held  that  the  words,  "as  per  memoran- 
dum of  agreement,"  did  not,  of  themselves,  make  the  promise  conditional, 
but  It  was  upon  the  defendant  to  prove  that  such  was  their  effect.  JURY  v. 
BARKER.  El..  Bl.  &  El.  459.  In  this  connection,  see,  also,  LOVELL  v.  HILL, 
6  Car.  &  P.  238,  and  JARVIS  v.  WILKINS.  7  Mees.  &  W.  410;  RICHARDSON 
T.  CARPENTER,  46  N.  Y.  661. 


§§  17-20)   CERTAINTY  AS  TO  TERMS  OF  ORDER  OR  PROMISE.         39 

effectuated,  but  they  would  be  effectuated  as  equitable  assignments, 
and  not  as  negotiable  instruments.  They  are  in  effect  mere  trans- 
fers of  single  rights,  and  not  instruments  fitted  to  circulate  as  a  medi- 
um based  upon  the  entire  credit  of  all  the  parties. 

The  mere  fact,  however,  that  a  particular  fund  is  referred  to  in 
an  instrument  does  not  make  it  payable  out  of  the  fund.^*  There  is 
a  wide  difference  between  instruments  drawn  payable  out  of  a  par- 
ticular fund  and  instruments  referring  to  a  particular  fund  from 
which  the  drawee  may  reimburse  himself.  The  former,  as  has  been 
said,  are  mere  equitable  assignments  pro  tanto  of  the  funds  men- 
tioned." And  the  drawee,  when  he  has  had  notice  of  the  delivery 
of  the  order  to  the  payee,  is  bound  to  apply  the  fund,  as  it  accrues, 
to  the  payment  of  the  order,  and  to  no  other  purpose.  But  if  an 
order  be  made  generally  upon  the  drawee  to  be  paid  by  him  in  the 
first  instance  on  the  credit  of  the  drawer  and  without  regard  to  the 
source  from  which  the  money  used  for  its  payment  is  obtained,  the 
designation  by  the  drawer  of  a  particular  fund  out  of  which  the 
drawee  is  subsequently  to  reimburse  himself  for  such  payment  or  a 
particular  account  to  whicli  it  is  to  be  charged  will  not  convert  the 
order  into  an  assignment  of  the  fund.'"  It  must  so  appear  in  the 
order,  to  have  that  effect.  And  the  order  must  contain  either  an  ex- 
press or  implied  direction  to  pay  therefrom,  and  not  otherwise.  In 
the  absence  of  express  words,  it  is  a  question  of  construction  whether 
the  fund  in  question  is  referred  to  as  a  measure  of  liability^or-ineaas 
of^jgimbursement'^  Where  the  words  themselves  used  are  am- 
biguous, the  rules  we  have  already  given  apply.'*  Where  there  are 
no  express  words,  then  the  fact  that  the  ordinary  language  of  a 
draft  is  used  implies  an  intention  to  make  the  order  negotiable. 
And  this  implication  overrides  the  implication  that  it  was  intended 
as  an  equitable  assignment."     It  is  the  duty  of  the  drawer  plainly 

»»  See  Neg.  Inst.  L.  §  22. 

»»  Lewis  V.  Berry,  64  Barb.  593;  Parker  r.  City  of  Syracuse,  31  N.  Y.  376; 
Alger  V.  Scott,  54  N.  Y.  14;  Risley  v.  Smith,  64  N.  Y.  576;  EIIRICHS  v.  DB 
MILL,  75  N.  Y.  370;  BRILL  v.  TUTTLE,  81  N.  Y.  457;  REDMAN  v.  ADAMS, 
61  Me.  429. 

•  0  MACLEED  v.  SNEE,  2  Strange,  762;   BRILL  v.  TUITLE,  81  N.  Y.  457. 
ei  SCIIMITTLER  v.  SIMOxN,  101  N.  Y.  554.  5  x\.  E.  452. 

•  2  St!e  pnge  32,  siijjra. 

•8  SCIIMIITLER  V.  SIMON,  101  N.  Y.  554,  5  N.  E.  452. 


40  OF    NEGOTIABLE    BILLS    AND    NOTES.  (Cll.    2 

to  limit  payment  to  a  particular  fund,  if  he  intends  so  to  limit  it. 
If  he  omits  to  do  this,  or  if  the  words  used  are  obscure,  ambig^uous, 
or  uncertain,  the  courts  assume  that  the  instrument  was  intended  to 
be  a  bill  of  exchange.®* 

Payment  on  Demand  or  at  Sight. 

Instruments  pa^^able  on  demand  "^  or  at  sight  are  payable  abso- 
tuteTyT^lH^ause  Lhe^irotdeT,  afliis  option,  may  fix  the  liability  ofthe 
maker."  The  purchaser  may  thus  know  exactly  what  to  pay  for 
them  when  he  discounts  them.  They  have  a  clear,  definite  value  in 
the  market,  and  are  thus  negotiable.'^  They  were  drawn  at  first 
with  the  evident  purj)ose  that  the  holders  might  for  their  own  con- 
venience fix  the  liability  by  presentment  or  demand,  whenever  they 
chose.  Such  a  rule,  however,  would  have  been  a  hardship  to  the 
drawer,  maker,  or  parties  already  liable  upon  the  instniment.  There- 
fore, said  the  courts,  such  presentation  or  demand  must  be  made  with- 
in a  reasonable  time,"  The  terms  "on  demand,"  or  "at  sight,"  are 
construed  as  not  meaning  a  term  of  credit,  because  an  unanswerable 
question  would  be  raised,  as  to  the  period  of  that  credit.  And,  there- 
fore, in  cases  of  such  instruments,  and  of  instruments  containing 
phrases  similar  to  them,  such  as  "payable  when  demanded,"  ®^  or 

«4  An  Instmment  In  the  following  language:  "Mr.  I.  B.  C.  &  Co.:  Please 
pay  C.  A.  C.  $100.90,  and  take  the  same  out  of  our  share  of  the  grain,"— Is  a 
valid  bill  of  exchange.  CORBETT  v.  CLARK,  45  Wis.  403;  Johns.  Cas.  Bills 
&  N.  28.  A  request  to  the  drawee  to  pay  to  a  certain  person  a  certain  amount 
of  money  "as  my  quarterly  half  pay,  to  be  due  from  24th  of  June  to  27th 
of  September  next,"  was  held  to  constitute  a  bill  of  exchange,  since  "the  men- 
tion of  the  half  pay  was  only  by  way  of  direction  how  he  should  reimburse 
himself,  but  the  money  was  still  to  be  advanced  on  the  credit  of  the  person." 
MACLEED  V.  SXEE,  2  Strange,  7G2;  SPROAT  v.  MATTHEWS,  1  Term  R. 
182;  REDMAN  v.  ADAMS,  51  Me.  429;  SPURGIN  v.  McPHEETERS,  42  Ind- 
527. 

«6  WORKS  v.  HERSHEY,  35  Iowa,  340. 

e«  See  Neg.  Inst.  L.  §  20,  subd.  3;   Id.  §  26. 

«7  SHEXTON  V.  JAMES,  5  Q.  B.  199. 

•  8  As  to  what  is  a  reasonable  time,  post,  p.  344. 

«»  Bowman  v.  McChesney,  22  Grat.  609.  A  promise  made  In  writing  to  pay 
a  certain  amount  on  demand,  "giving  six  months'  notice  for  the  same,"  was 
held  to  be  a  good  note  in  the  case  of  WALKER  v.  ROBERTS,  Car.  Sl  M.  590. 
HALL  V.  TOBY,  110  Pa.  St.  318.  1  Atl.  3G9. 


§§  17-20)   CERTAINTY  A3  TO  TERMS  OP  ORDER  OR  PROMISE.         41 

"on  call,"  or  "when  called  for,"  ^'  all  of  which  mean  the  same  thing, 
it  is  the  duty  of  the  holder  to  make  the  presentation  within  a  rea- 
Bonable  time!  Similar  methods  of  construction  were  employed 
where  the  instrument  failed  to  express  any  time  of  payment  at  alL 
In  such  cases  it  was  reasoned  that  the  instrument  would  become  due 
some  time,  and  where  the  parties  themselves  failed  to  fix  any  time, 
the  la^v  fixed  one  for  them,  which  was  immediately.  Thus  instru- 
ments which  failed  to  contain  an  expression  of  the  time  of  payment 
were  deemed  equivalent  to  instruments  payable  on  demand,^^  and 
the  rules  we  have  heretofore  given  applied  to  them  J' 

Payment  in  Installments. 

It  remains  to  notice  instruments  payable  in  installments.  An  in- 
strument may  be  payable  in  installments  due  at  specified  times;  ^'  or 
it  may  be  payable  in  installments  due  at  specified  times,  the  whole 
sum  to  become  die  on  the  default  in  the  payment  of  any  installment. 
And  eithei  clause,  the  latter,  however,  with  what  seems  a  lack  of 
appreciatioja  of  sound  business  methods,  the  courts  declare  to  be 
proper  for  a  negotiable  instrument*     From  a  business  point  of 

'•  CROSSAIORE  V.  PAGE,  73  Cal.  213,  14  Pac.  787,  DIXON  v.  NUTTALL,  1 
Cromp.,  M   &  R.  307. 

Ti  A  note  specifying  no  time  of  payment  is  In  legal  effect  payable  on  demand. 
This  is  so  even  though  It  provides  for  interest.  First  Nat.  Banli  v.  Price,  52 
Iowa,  570,  3  N.  W  639;  Johns.  Cas.  Bills  &  N.  19.  "The  conclusion  of 
the  law  is  that,  where  no  time  of  payment  is  specified  in  a  note,  It  Is  payable 
lmmedlaiel7.'=  Per  Curiam,  in  HERRICK  v.  BENNETT,  8  Johns.  (N.  Y.)  374. 
LIBBY  V.  MIKELBORG,  28  Minn.  38.  8  N.  W.  903.  In  PAGE  v.  COOK.  164 
Mass.  110,  41  N.  E.  115.  a  note  in  form,  "On  demand,  after  date,  I  promise  to 
pay  •  •  •  $.")00,  payable  when  payor  and  payee  mutually  agree,"  was 
construed  as  meaning  that  It  was  payable  when  the  payor  ought  reasonably  to 
have  agreed;  that  Is,  within  a  reasonable  time.  See  Neg.  Inst.  L.  §  26,  subd. 
2;  MoLeod  v.  Hunter,  61  N.  Y.  Supp.  73,  29  Misc.  Rep.  558  (under  section  26). 

7  2  When  an  Instrument  is  Issued,  accepted,  or  indorsed  when  overdue,  it  is, 
as  against  the  person  accepting,  issuing,  or  indorsing,  payable  on  demand. 
BASSENHORST  V.  WILBY,  45  Ohio  St.  333,  13  N.  B.  75;  Smith  v.  Caro,  » 
Or.  278.     See  Neg.  Inst.  L.  §  26. 

T«  RIKER  V.  MANUFACTURING  CO.,  14  R.  I.  402. 

74  CARLON  v.  KENEALY,  12  Mees.  &  W.  139.  In  this  case  the  note  was  to 
become  immediatoly  payable  on  default  In  payment  of  the  first  iuslnllincnt. 
There  was  a  special  demurrer  on  the  ground  that,  since  the  second  Inslnllment 
was  payable  by  way  of  condition  and  ptmalty,  the  note  was  not  negotiable^ 


42  OF  NEGOTIABLE    BILLS    AND    NOTES.  (Ch.   2 

view,  a  man  may  as  well  give  one  piece  of  paper  payable  in  several 
installments  as  divide  up  the  principal  indebtedness  and  give  sepa- 
rate instruments  for  it.  But  there  is  a  great  difference  between  such 
an  instrument  and  one  which  may  become  wholly  due,  at  the  payee's 
option,  by  reason  of  a  default  at  any  one  of  a  series  of  times.  In- 
struments of  the  last  class  are  open  to  the  criticism  that  they  are 
uncertain  in  amount,  as  well  as  in  time  of  payment  of  installments 
subsequent  to  the  first;  but  in  spite  of  these  considerations  their 
negotiability  is  firmly  established.'" 

PAYMENT  OF  MONEY  ONLY. 
SI.  The  instrument  must  be  for  payment  in  money  only. 

22.  A  negotiable  instrument  must  be  for  the  payment 
of  money  -without  connected  promise,  -whether  disjunctive 
or  conjunctive,  for  the  performance  of  some  other  act. 

23.  (a)  A  negotiable  instrument  may  contain  an  addi- 
tional agreement,  v^hich  is  not  of  the  essence  of  the  order 
or  promise,  but  is  merely  incidental  or  collateral  to  it. 

24.  (b)  A  negotiable  instrument  may  give  the  holder  an 
option  between  payment  of  money  and  some  other  thing. 

25.  The  amount  of  money  to   be   paid  must   be  certain. 
EXCEPTIONS— (a)   That    the   instrument   is   payable 

-with  interest  does  not  destroy  its  negotiability, 
(b)  That   the   instrument  is  payable  -with  current  ex- 
change does  not  destroy  its  negotiability. 

The  following  was  a  portion  of  the  opinion  of  the  court:  "It  Is  not  a  con- 
tingency; it  depends  on  the  act  of  the  malier  himself;  and,  on  his  default,  it 
becomes  a  promissory  note  for  the  whole  amount."  Roberts  v.  Snow,  27  Neb. 
425,  43  N.  W.  241.  MILLER  v.  BIDDLE.  13  Law  T.  (N.  S.)  334.  This  was 
an  action  upon  a  promissory  note,  not  made  payable  to  order  or  bearer,  and 
payable  by  installments,  with  a  condition  that  if  any  installment  were  not 
duly  paid  the  whole  sum  should  become  due  immediately.  In  accordance 
with  the  case  of  CARLON  v.  KEXEALY,  supra,  the  instrument  was  held  ne- 
gotiable, though  Pollock,  C.  B.,  dissented.  Goshen  &  M.  Turnpike  Road  v. 
Hurtin,  9  Johns.  217;  Washington  Co.  Mut.  Ins.  Co.  v.  Miller,  26  Vt.  77;  WIL- 
SON V.  CAMPBELL,  110  Mich.  5S0.  68  N.  W.  278;  CHICAGO  RY.  EQUIP- 
MENT CO.  V.  BANK,  136  U.  S.  268,  10  Sup.  Ct,  *J99. 
7  6  See  Neg.  lust  L.  §  2L 


§§  21-25)  PAYMENT    OF    MONEY    ONLY,  43 

Definition  of  ^'^ Money.'''* 

Bills  and  notes,  being  representatives  of  money,  must  be  payable 
in_money.'"  "Money /^jwithin  this  rule,  means  whatever  may  be  used 
as  legal  tender  for  payment  o.^  (iphfa_nt  thr^  pinnn  i^Vit>rprfKH~|^ij]  ^ 
nole_is_pavable.  In  the  United  States  what  is  legal  tender  is  deter- 
mined by  the  "Legal  Tender  Acts."  ^^  Where  there  are  several  kinds 
of  legal  tender,  as  gold,  silver,  and  notes,  a  bill  or  note  may  be  made 
payable  in  either.^®  But  all  other  kinds  of  currency,  whether  coin 
or  paper,  are  in  law  but  "collateral  commodities,  like  ingots  or  dia- 
monds, which,  though  they  might  be  received,  and  be  in  fact  equiva- 
lent to  money,  are  yet  but  goods  and  chattels,"  '•  or  mere  choses  in 
action.  For  this  reason  an  instrument  which  possesses  all  the 
other  requisites  of  a  bill  or  note  is  not  such  if  the  medium  of  pay- 
ment be  limited  to  what  is  not  "money."  **    It  is  true  that  there  is 

te  See  Neg.  Inst.  L.  §  20,  subd.  2.     Cf.  §  220. 

TT  Rev.  St.  U.  S.  §§  3584-3590. 

7  8  CHRYSLER  v.  RENOIS,  43  N.  Y.  209. 

T9  THOMPSON  V.  SLOAN,  23  Wend.  (N.  Y.)  71,  per  Cowen,  J. 

80  Common  terms  which  have  been  held  excluded  within  the  above  rule  are 
"funds  current,"  "current  money,"  "currency,"  "current  funds,"  "current  bank 
paper,"  "current  banli  bills,"  "common  currency,"  "notes  receivable  in  baulv," 
"currency  of  Missouri,"  "current  banli  notes,"  "banlj  notes,"  "New  York 
funds,"  "Arkansas  money,"  "foreign  bills,"  "Pennsylvania  bank  bills,"  "Missis- 
sippi bank  notes,"  "specie."  IRVINE  v.  LOWRY,  14  Pet.  293;  Hasbrook 
v.  Palmer,  2  McLean,  10  Fed.  Cas.  No.  6,188;  Fry  v.  Reusseau,  3  McLean,  106, 
Fed.  Cas.  No.  5.141;  Hawkins  v.  Watkins,  5  Ark.  481;  JONES  v.  FALES,  4 
Mass.  245;  Young  v.  Adams,  6  Mass.  182;  Leiber  v.  Goodrich,  5  Cow.  180; 
State  v.  Corpening,  10  Ired.  58;  Besancon  v.  Shirley,  9  Smedes  &  M.  457; 
Cdllins  v.  Lincoln,  11  Vt.  268;  Campbell  v.  Weister,  1  Litt.  (Ky.)  30;  Breck- 
inridge V.  Ralls,  4  T.  B.  Mon.  583;  Simpson  v.  Mouldon,  3  Cold.  429;  FIRST 
NAT.  BANK  v.  SLETTE,  07  Minn.  425,  69  N.  W.  1148  ("payable  by  New  York 
exchange").  In  REX  v.  WILCOX,  Bailey,  Bills  (6th  Ed.)  11,  an  instrument 
payal)Ie  "In  cash  or  Bank  of  England  notes"  was  held  not  to  bo  a  note.  Prof. 
Ames  points  out  a  fact  which  has  sometimes  been  overlooked  In  reference  to 
tills  cast.', -tiiat  it  was  decided  prior  to  tlie  statutes  making  Bank  of  Eiiglaml 
notes  legal  tender.  1  Ames,  Cas.  Bills  &  N.  p.  39,  note  2.  In  CRAY  v.  WOR- 
Di;.\.  29  U.  C.  Q.  B.  539,  it  was  held  that  an  Instrument  payable  In  "Canada 
bills"  was  not  a  note,  notwitlistanding  a  statute  making  such  bills  legal  tender. 
The  court  said:  "It  may  be  that  a  person  can  make  a  promissory  note  payal)Ie 
in  a  particular  coin,  as  in  gold  or  silver,  because  they  are  respivtively  ni(iiu>y 
and  sijecie;    but  I  think  he  cannot  make  it  payable  In  Canada  bills,  because 


44  OF    NEGOTIABLE    BILLS    AND    NOTES.  (Ch.   2 

great  conflict  amoug  the  decisions  upon  tbis  point,  and  some  courts 
have  held,**^  while  other  courts  have  denied,®^  that  instruments  were 
negotiable  which  were  payable  in  "current  funds"  or  "currency,"  or 
where  other  like  expressions  were  used.  Some  courts  have  even  held 
negotiable  instruments  in  which  the  language  used  could  not  by 
any  possible  consti'uction  be  deemed  to  designate  legal  tender.®' 
It  is  to  be  borne  in  mind,  however,  that  the  construction  of  the  in- 
strument is  for  the  court,  and  that  courts  have  frequently  differed 
in  their  construction,  often  in  the  light  of  local  usage  of  particular 
words;  thus  holding  variously  that  identical  expressions  did  or  did 
not  amount  to  a  designation  of  legal  tender,  while  agreeing  that  the 
instrument,  to  be  negotiable,  must  be  payable  in  that  medium.** 
Thus  it  has  been  held  by  the  supreme  court  of  the  United  States 
that  a  check  payable  "in  current  funds"  is  negotiable.     Field,  J., 

they  are  not  money  or  specie.  They  have  no  Intrinsic  value,  as  coin  has; 
they  represent  only,  and  are  the  signs  of,  value.  'Money  itself  is  a  commodity; 
It  is  not  a  sign;  it  is  the  thing  siguifled.'  McCulloch,  Polit.  Econ.  1.35."  But 
this  opinion,  as  Prof.  Ames  points  out  (2  Cas.  Bills  &  N.  829),  "however  sound 
in  political  economy,  is  unsound  in  law." 

81  Telford  v.  Patton,  144  111.  611   33  N.  E.  1119;  Citizens'  Nat.  Bank  v.  Brown, 

45  Ohio  St.  39,  11  N.  E.  799;  BUTLER  v.  PAINE,  8  Minn.  324  (Gil.  284); 
PHELPS  V.  town;  14  Mich.  374;    LAIRD  v.  STATE,  61  Md.  309. 

82  Piatt  V.  Bank,  17  Wis.  222;  WRIGHT  v.  HART,  44  Pa.  St.  454;  HUSE 
V.  HAINIBLIN,  29  Iowa,  501;   Mobile  Bank  v.  Brown,  42  Ala.  108. 

88  "York  state  bills  or  specie."  Keith  v.  Jones,  9  Johns.  (N.  Y.)  120.  A  note 
payable  "in  the  bank  notes  cuiTent  in  the  city  of  New  Yorli," — on  the  ground 
that  it  is  confined  to  bank  paper  of  known  cash  value.  Judah  v.  ITnnis,  19 
Johns.  (N.  Y.)  144.  "Current  Ohio  bank  notes."  SWETLAND  v.  CREIGH, 
15  Ohio.  118. 

«*  A  note  payable  in  Tennessee  money.  It  was  held  that  such  a  note  was, 
to  all  legal  intents,  payable  in  gold  or  silver.  "The  case  is  different  where  It 
is  payable  In  Tennessee  bank  notes."  SEARCY  v.  VANCE.  Mart.  &  Y.  (Tenn.) 
225.  With  reference  to  the  apparent  irreconciial)ility  of  some  of  the  cases, 
Mr.  Wood  makes  the  following  explanation:  "It  will  be  seen,  upon  exam- 
ination of  the  cases,  that  many  of  them  are  not  so  irreconcilable  as  at  first 
sight  they  may  appear.  Many  of  them  construe  the  words  'current  money, 
New  York  funds,'  etc.,  used  in  bills  and  notea,  to  mean  lawful  gold  and  silver 
coin  of  the  United  States.  A  contract  for  the  payment  of  a  certain  sum  in 
bank  notes  or  other  paper  currency  may  or  may  not  be  equivalent  to  tliat  sum 
in  specie.  The  extent  of  the  obligation  depends  on  the  meaning  wliich  usage 
affixes  to  the  terms  at  the  time  the  contract  was  made."  Byles,  Bills  (Wood's 
Notes)  p.  95. 


§§  21-25)  paymp:nt  of  money  only.  45 

gaid:  "Within  a  few  years,  commencing  with  the  first  issue  In  this 
country  of  notes  declared  to  have  the  quality  of  legal  tender,  it  has 
been  a  common  practice  of  drawers  of  bills  of  exchange  or  checks, 
or  makers  of  promissory  notes,  to  indicate  whether  the  same  are 
to  be  paid  in  gold  or  silver  or  in  such  notes;  and  the  term  'current 
funds'  has  been  used  to  designate  any  of  these,  all  beiug  current, 
and  declared  by  positive  enactment  to  be  legal  tender.  It  was  in- 
tended to  cover  whatever  was  receivable  and  current  by  law  as 
money,  whether  in  the  form  of  notes  or  coin.  Thus  construed,  we 
do  not  think  the  negotiability  of  the  paper  in  question  was  im- 
paired by  th*=?  insertion  of  these  words."  ®' 

Payment  in  Property   Other  than  Money. 

The  rea*  reason  for  the  requirement  that  negotiable  instruments 
must  be  payabl"  in  money  obviously  is  that  money  is  the  one  stand- 
ard oi  value  in  actual  business.  All  other  commodities  may  rise 
and  fall  in  valu3.  but  in  theory,  at  least,  money  always  measures 
this  rise  and  fall,  and  remains  the  same.  The  chattel  which  is  used 
as  a  means  ot  payment  may  fluctuate  in  value.  Thus,  "a  note  pay- 
able in  neat  cattle,"  *'  a  promise  to  pay  "in  a  good  horse,  to  be  worth 
$80.00,  and  goods  out  of  store  amounting  to  $20.00,"  *^ — are  non- 
negotiable.  Thes3  instruments  are  special  contracts  for  delivery  of 
chattels,  and  not  negotiable  instruments.*'  The  damages  recover- 
able upon  them  are  held  to  be  in  some  states  the  actual  value  of  the 
articles  on  the  day  stipulated  for  payment;*®  but  in  New  York,®" 

«B  BULL  V.  BANK,  123  U.  S.  105,  8  Sup.  Ct.  G2.  Neg.  Inst.  L.  §  25,  provides 
thRt  the  validity  and  negotiable  character  of  the  Instrument  are  not  afTected  by 
the  fact  that  It  designates  a  particular  kind  of  current  money  in  which  payment 
Is  to  be  made. 

88  JEROME  V.  WHITNEY,  7  Johns.  (N.  Y.)  322. 

87  THOMAS  V.  ROOSA,  7  Johns,  (N.  Y.)  401.  For  other  authorities,  see 
Byles.  Bills  (Wood's  Notes)  p.  95. 

88  Matthews  v.  Houghton,  11  Me.  377;  Rhodes  v.  Lindley.  Ohio  Cond.  R. 
465;  Lawrence  v.  Dougherty,  5  Yerg.  (Tenn.)  435;  AUERBACII  v.  ruiTCII- 
ETT.  58  Ala.  451;  Smith  v.  Boheme,  1  Chit.  Jr.  Bills,  234;  CLARK  v.  KINO, 
2  Ma?s.  .^)24;  Gushee  v.  Eddy,  11  Gray  (Mass.)  502.  In  QUINBY  v.  MEIIKITT 
It  was  held  that  a  written  agreement  to  pay  the  equivalent  of  a  c(M-iain  sum 
In  labor  did  not  constitute  a  promissory  note.     11  Humph.  (Tenn.)  4.'?:). 

88  McDonald  v,  Hodge,  5  Hayw.  (Tenn.)  85;  Edgar  v.  Boles,  11  Sorg.  &  R. 
445;   McGehee  v.  Posey,  42  Ala.  330. 

•0  Plnney  v.  Gleason,  5  Wend.  393.     Vermont,  Connecticut,  and  Olilo  have 


46  OF    NEGOTIABLE    BILLS    AND    NOTES.  (Ch.   2 

although  it  is  admitted  that  these  contracts  are  merely  for  the  deliv- 
ery of  specific  articles,  yet  when  the  words  were,  "To  pay  J.  P.  $79.50, 
Aug.  1st,  1822,  in  salt,  at  14s.  per  bbl.,"  it  was  held  that  it  was  in- 
tended at  the  time  of  making  the  contract  to  receive  the  goods 
instead  of  money,  and  that  the  goods  had,  therefore,  a  fixed  value, 
which  must  be  treated  as  the  measure  of  damages.  In  other  re- 
spects, the  debtor  must  seek  his  creditor  to  perform  the  contract 
as  is  the  usual  rule.  If  the  chattels  are  ponderous,  the  maker  of  the 
note  must  seek  the  payee,  and  see  where  he  will  receive  them. 

Payment  in  Foreign  Money. 

There  is  one  apparent  deviation  from  the  rule,  which  it  is  impor- 
tant to  notice.  Where  a  bill  or  note  is  expressed  in  moqev  of  a 
forpif!;-n  denomination,  it  is  still  negotiable."^  The  courts,  under  the 
statutes  of  the  United  States,®*  will  take  judicial  notice  of  the  fact 
that  the  value  of  foreign  coin,  as  expressed  in  the  money  of  account 
in  the  United  States,  shall  be  that  of  the  pure  metal  of  such  coin 
of  standard  value;  and  that  the  value  of  the  standard  coin  of  the 
various  nations  of  the  world  in  circulation  is  estimated  annually 
by  the  directors  of  the  mint,  and  proclaimed  on  the  first  day  of 
January  by  the  secretary  of  the  treasury.     These  foreign  denomina- 

a  similar  rule.  Culver  v.  Robinson,  3  Day  (Conn.)  68;  Perry  v.  Smith,  22 
Vt.  301. 

»i  "A  note  payable  In  pounds,  shillings,  and  pence,  made  In  any  country, 
Is  but  another  mode  of  expressing  the  amount  In  dollars  and  cents,  and  it  is 
so  understood  judicially."  THOMPSON  v.  SLOAN,  23  Wend.  (N.  Y.)  71,  per 
Cowen,  J.  An  instrument  wheJ-eby  the  maker  promised  to  pay  "one  thoui^and 
Mexican  silver  dollars"  was  held  to  be  a  note.  Hogue  v.  Williamson,  85  Tex. 
553,  22  S.  W.  580.  Daniel,  Neg.  Inst.  §  58,  criticising  the  language  of  Cowen, 
J.,  supra,  says:  "Intention,  to  be  gathered  from  the  face  of  the  paper,  ac- 
cording to  fixed  rules,  is  the  test  of  negotiability,  and  we  do  not  see  how  the 
idea  of  its  possessing  a  negotiable  quality  is  excluded  by  the  mere  fact  the 
denomination  of  foreign  money  is  not  set  out;"  citing  BLACK  f.  WARD, 
27  Mich.  193,  where  It  was  held  that  a  note  made  in  Michigan  and  payable  in 
Canada  in  "Canada  currency"  was  payable  in  money,  and  negotiable.  Compare 
St.  Stephen  Branch  Ry.  Co.  v.  Black,  2  Hann.  130,  where  an  instrument  prom- 
ising to  pay  "three  hundred  and  seventy-one  dollars,  payable  In  U.  S.  cur- 
rency," was  held  to  be  a  note.  It  was  said  that  "U.  S.  currency"  meant  money 
of  the  United  States,  and  the  Instrument  was  construed  as  being  "for  payment 
of  three  hundred  and  seventy-one  dollars  of  the  United  States." 

•  2  Rev,  St  §  35G4. 


§§  21-25)  PAYMENT    OF    MONEY    ONLY.  ^j  47 

tions  therefore  can  always  be  paid  in  our  own  coin  of  equivalent 
value,  to  which  it  is  always  reduced  on  a  recovei*y.*'  In  an  action 
upon  such  an  instrument  the  course  is  to  prove  the  value  of  the  sum 
expressed  in  our  own  tenderable  coin,  because  the  instrumeut  can 
be  construed  by  the  courts  to  be  payable  in  no  other."*  In  the  cal- 
culation of  this  sum  there  is  to  be  added  the  item  called  "exchange." 
This  means  the  difference  in  value  in  the  same  amount  of  money 
in  different  countries.  Thus,  in  the  illustration  in  the  footnote  to 
section  10,  if  there  were  more  debts  due  from  England  to  Jamaica 
than  from  Jamaica  to  England,  the  demand  in  England  for  bills  on 
Jamaica  would  be  greater  than  the  demand  in  Jamaica  for  bills  on 
England.  Hence,  in  England,  it  would  be  more  expensive  to  pro- 
cure a  bill  on  Jamaica  than  it  would  be,  in  Jamaica,  to  i)rocure  a 
bill  on  England.  Thus  B,  in  England,  would  be  obliged  to  pay  A 
something  for  the  debt  C,  in  Jamaica,  owes  to  A,  in  England,  be- 
cause the  other  English  debtors  would  willingly  pay  something  to 
avoid  the  risk  and  expense  of  transmitting  money  to  discharge  their 
debts.  And  thus  B  must  pay  A  something  in  addition  for  the  draft 
which  A  sells  him,  and  which  A  could  otherwise  sell  in  the  open 
market.  This  something  is  the  amount  which  it  will  cost  to  re])lace 
the  £1,000  in  England  in  Jamaica,  or  which  the  right  to  a  sum  of 
money  due  in  Jamaica  will  produce  in  money  in  England.  The  rate 
of  exchange  depends  upon  the  balance  of  trade  with  England;  and 
if  it  is  excessive,  and  is  sufficient  to  pay  the  expense  of  exporting 
the  i)recious  metals,  gold  will  be  sent  in  preference  to  bills  of 
exchange  jjurchased  at  the  current  rate."°  This  item,  as  has  been 
said,  is  to  be  added,  and  the  courts  construe  the  iustniuient  to  mean, 
where  it  is  drawn  in  one  country  and  payable  in  another,  and  the 
amount  is  expressed  in  the  money  of  the  former,  that  the  amount 
must  be  calculated  according  to  the  rate  of  exchange  on  the  day  the 
instrument  is  payable.*" 

»»  2  Chit.  Bills  (Am.  Ed.  1839)  G15,  616;  DEBERRY  v.  DARNELL,  5  Ycrg. 
(Tenn.)  451. 

»*  THOMBSON  V.  SLOAN,  23  Wend.  (N.  Y.)  71;  Bayley,  Bills  (Am.  Ed.  1S3G) 
23. 

•  8  Schermerhorn  v.  Talman.  14  N.  Y.  93,  page  136. 

»8  Grant  v.  Healey,  3  Sumn.  rj23,  Eed.  Caa.  No.  5.696;  Smith  t.  Shaw,  2 
Waah.  C.  C.   167,  Fed.   Gas.  No.  13,107;    Lee  v.  Wllcocks,  5  Serg.  &   11.   48; 


48  OF    NKGOTIABLE    BILLS    AND    NOTES.  (C/h.    2 

Perfarmance  of  Other  Acts  in  Addition  to  Payment  of  Money. 

The  ivasuns  alit;iily  «;i\('n  have  ^^uided  the  courts  in  laying  down 
the  rule  that  W^  order  or  prouiise  must  not  be  for  the  payment  of 
moucy  and  the  ^^r^f(>!^^lanc^e  of  mmie  (iIIkm-  n.-f  "^  The  authority  gen- 
erally quoted  on  this  point  is  Martin  v,  Chauntry.**  This  instru- 
ment was  a  note  "to  deliver  up  horses  and  a  wharf,  and  pay  money." 
It  was  held  not  to  be  a  note  within  the  statute  of  Anne;  for,  said 
IJaron  Parke  in  a  later  case,**  to  constitute  a  promissory  note  the 
promise  must  be  to  pay  a  sum  certain  and  nothing  else.^*^"  The 
reason  for  this  is  that  to  ingraft  a  special  agreement  upon  a  general 
promise  to  pay  money  would  be  at  once  to  defeat  its  practical  use- 
fulness as  a  quasi  money.  Professor  Ames,  with  his  usual  force, 
points  out  the  objectious:  "One  could  be  indorsed,  the  other  would 
have  to  be  assigned.  In  some  jurisdictions  the  action  could  be 
brought  by  the  indorsee  in  his  own  name,  but  as  assignee  he  could 
only  sue  in  the  name  of  his  assignor.  In  the  case  of  the  negotiable 
instrument  l)eing  in  the  hands  of  a  bona  fide  holder,  no  defense  of 
fianil  or  latent  ecjuity  would  avail;  in  case  of  the  holder  as  assignee, 
all  would  avail." 

Terms  Collateral  or  Incidental  to  Order  or  Promise. 

But  while  an  instrument  which  incorporates  with  the  order  or 
promise  to  pay  an  agreement  to  do  some  other  act  is  not  a  bill  or 
note,  it  is  possible,  without  destroying  the  negotiability  of  a  bill 
or  note,  to  annexto  it  an  agreement  which  relates  to  it,  buF'which 
isuuerely  incidental.  The  point  to  determine  is  whether  such  agree- 
ment is  a  part  of  or  necessary  to  the  fulfillment  of  the  promise  or 
order.  If  it  is  not,  it  does  not  destroy  the  instrument's  negotia- 
bility.'"^  The  case  commonly  referred  to  as  the  leading  authority 
Is  WISE  V.  CIIARLTON.^°='     This  was  a  promise  to  pay  to  J.  or 

Bank  of  Missouri  v.  Wright.  10  Mo.  719;  Scott  v.  Bevan,  2  Barn.  &  AdoL  78; 
Cash  V.  Kennlon,  11  Ves.  314. 

•  T  See  Neg.  Inst.  L.  §  24. 

»«  2  Stranse.  1271. 

»»  FOLLETT  V.  MOORE.  4  Exch.  418. 

100  COOK  V.  S.\'1^EKLEE.  6  Cow.  (N.  T.)  108;  Fletcher  v.  Thompson,  55 
N.  H.  308;  First  Nat.  Banlf  v.  Carson,  60  Mich.  433,  27  N.  W.  589. 

»oi  See  Neg.  Inst.  L.  S  24,  subd.  1. 

»o»4  Add.  &  E.  78G.  The  fact  that  a  note  contains  a  contract  as  to  col- 
lateral security,  and  provides  the  means  for  converting  the  security,  will  uot 


§§  21-25)  PAYMENT   OF   MONEY    ONLY.  49 

order  £.125,  and  contained  the  added  words,  "And  I  have  deposited 
in  his  hands  title  deeds  *  *  *  as  a  collateral  security."  It  was 
contended  that  the  right  to  transfer  the  deeds  was  not  negotiable, 
while  the  right  to  transfer  the  note  was,  but  the  court  held  that 
the  memorandum  of  security  was  not  imported  into  the  main  agree- 
ment, which  was  to  pay  money.  Examples  of  this  rule  are  memo- 
randa upon  the  face  of  an  instrument  showing  for  what  consider- 
ation it  was  given, ^°^  as  that  it  "is  secured  according  to  the  condition 
of  a  certain  mortgage,"  ^°*  or  that  "it  was  given  in  consideration  of 
a  patent  right."  ^"^  In  New  York  the  leading  case  is  LEONARD  v. 
MASON."®  There  the  draft  was:  "Levi  Mason,  Esq.:  Please  pay 
the  above  note,  and  hold  it  against  me  in  our  settlement."  The  court 
said  the  reference  in  the  note  was  merely  to  ascertain  the  amount, 
and  "retaining  the  note  as  a  voucher  is  no  more  the  performance  of 
another  act  besides  the  payment  of  the  money  than  the  retaining 
the  order  itself  for  the  same  purpose."  HODGES  v.  SHULER"' 
is  also  noteworthy.  There  the  promise  was  to  pay  to  S.  or  order  $1,- 
000,  with  interest,  payable  as  per  attached  interest  warrants,  "or,  up- 
on the  surrender  of  this  note,  together  with  the  interest  warrants,  not 
due  to  the  treasurer  [of  the  maker]  *  *  *,  he  [the  treasurer]  shall 
issue  tc  the  holder  thereof  ten  shares  in  the  capital  stock,"  etc.  There 
were  thus  two  courses  open  to  the  holder  of  the  instrument,  but  not  to 
the  maker.  His  promise  for  the  payment  of  a  sum  of  money  was  un- 
conditional. He  might  not  pay  in  money  or  in  stock,  but  the  holder 
might,  at  his  option,  surrender  the  note  and  take  the  stock,  thus 

deprive  It  of  Its  negotiable  property.  The  persons  indorsing  such  Inetruments 
undoubtedly  intend  to  stand  In  the  position,  and  to  incur  the  liabilities,  of  In- 
dorsers  of  commercial  paper.  ARNOLD  v.  RAILROAD  CO.,  5  Duer  (N.  Y.) 
207.  See,  also,  Towne  v.  Rice.  122  Mass.  67;  VALLEY  NAT.  BANK  v.  CROW- 
ELL,  148  Pa.  St.  284,  23  AtL  1068. 

108  See  Neg.  Inst.  L.  §  22,  subd.  2.  Section  22,  subd.  2,  and  section  23,  subd. 
2,  are  not  applicable  to  a  conditional  sale  note,  whereby  ownership  of  the  thing 
sold  remains  in  the  seller,  and  the  buyer  Is  given  the  right  to  acquire  It  by  per- 
forming conditions;  and  such  instrument  Is  not  a  negotiable  note.  Third  Nat. 
I'.ank  V.  Spring,  59  N.  Y.  Supp.  794,  28  Misc.  Rep.  9. 

10*  Hereth  v.  Meyer,  33  Ind.  511;   Mott  v.  Havana  Nat.  Bank,  22  Uiin,  ;?54. 

lOB  Tassey  v.  Church,  4  Watta  &  S.  141;  SIEGEL  y.  BANK,  131  IlL  5G9.  23 
N.  E.  417. 

108  1  Wend.  622. 

»0T  22  N.  Y.  114. 

NEG.BILLS.— 4 


50  OF    NE(J(VriAnLE    BILLS    AND    NOTES.  (Ch.    2 

in  no  wise  compromising  the  right  of  any  holder  to  collect  the  full 
amount  of  money  called  for  by  the  instrument.  The  stipulation  con- 
cerning the  stock  was  an  incident  to  the  note,  not  of  the  essence 
of  the  promise  to  pay  money. ^"^ 

Payment  in  Alternative. 

This  test  determines  also  the  negotiability  of  that  large  class  of 
instruments  payable  in  the  alternative  which  are  deemed  by  the 
courts  absolute  promises  for  the  payment  of  money.^"®  Such  are 
options  between  payment  of  money  and  the  delivery  of  some  other 
thing.^*°  The  courts  declare  that  "the  instrument  is  no  lesg,  an 
absolute  promise  for  the  payment  of  money  because  it  vests  the 
lio]der"~with  the  option  to  take  payment  in  something  else  than 
money."  The  reason  is  that  the  maker  or  party  on  whose  creditTlie 
ilTsffumeut  circulates  is  absolutely  bound,  and  bound,  moreover,  to 
pay  money  alone.  As  long  as  this  is  the  obligation  of  the  promisor, 
it  would  be  inexpedient  to  deny  the  instrument  the  immunities  of 
negotiability  because  of  stipulations  which  are  beneficial,  and  per- 
haps may  add  to  its  value.  These  stipulations  vest  in  the  promisee 
or  i)erson  who  discounts  the  bill  or  note  the  option  whether  he  will 
enforce  them  or  not.  The  maker,  in  every  event,  is  bound  absolutely 
to  pay  money. 

Pmoer   to    Confess  Judgment —  Waiver  of  Exemptions — Payment  of 

Attorney'' 8  Fees. 

In  conformity  with  the  rule  that  a  mere  incidental  agreement, 

which  is  collateral  to  the  order  or  promise  to  pay,  does  not  render 

it  non-negotiable,  it  is  generally,  though  by  no  means  universally, 

108  Oatman  v.  Taylor,  29  N.  Y.  649;  Willoughby  v.  Comstock,  3  Hill,  3S9; 
Falrchild  v.  Railroad  Co.,  15  N.  Y.  337.  Clause  authorizing  payee  bank  to 
appropriate  on  note  money  which  maker  might  have  In  bank  on  deposit  or 
otherwise,  held  not  to  destroy  negotiability.  Louisville  Banking  Co.  v.  Gray 
(Ala.)  2G  South.  205. 

loB  Kirk  V.  Insurance  Co.,  39  Wis.  138;  Heard  v.  Bank.  8  Neb.  16.  See  Neg. 
Inst.  L.  §  24.  subd.  4. 

no  OWEN  V.  BARNUM,  2  Gilman  (lU.)  461;  PRESTON  v.  WHITNEY,  23 
Mich.  2G0;  Dennett  v.  Goodwin,  32  Me.  44.  In  HOSSTATTER  v.  WILSON 
It  was  held  that  a  note  promising  to  pay  at  a  certain  time  In  money  (or  in  goods 
on  demand)  was  a  good  promissory  note.  The  maker  has  no  election  to  do 
otherwise  than  to  pay  money,  though  the  holder  may  elect  to  take  goods.  36 
Barb.  (N.  Y.)  307. 


§§  21-25)  PAYMENT   OF    MONEY    ONLY.  51 

held  that  an  instrument  is  none  the  less  negotiable  because  it  con- 
tains provisions,  to  take  effect  if  it  is  not  paid  at  maturity,  (1)  au- 
thorizing the  holder  to  confess  judgment  for  the  maker;  *^*  or  (2) 
waiving  defenses,  or  the  benefit  of  stay  or  exemption  laws;  ^^*  or 
(3)  promising  to  pay  costs  of  collection  and  attorney's  fees.^^^  It 
was  said  by  Gibson,  C.  J.,  in  a  case  which  held  that  a  power  to  con- 
fess judgment,  and  waiver  of  stay  of  execution  and  appraisement, 
rendered  a  note  non-negotiable,  that  "a  negotiable  bill  or  note  is  a 
courier  without  luggage,"  and  that  "the  parties  could  not  have  in- 
tended to  impress  a  commercial  character  on  the  note,  dragging 
after  it,  as  it  would,  a  train  of  special  provisions,  which  would  mate- 
rially impede  its  circulation."  ^^*  But  in  ansAver  to  this  objection 
it  has  been  well  said  that  such  provisions  do  not  impede,  but  aid, 
the  circulation.  While  in  answer  to  another  objection,  which  has 
been  urged,  that  a  provision  for  payment  of  costs  and  attorney's  fees 
renders  uncertain  the  amount  to  be  paid,  it  is  a  sufficient  answer 
that,  the  amount  payable  at  maturity  being  certain,  a  promise  to 
pay  an  additional,  even  if  uncertain,  amount  in  case  of  non-payment 
at  maturity,  after  which  time  the  instrument  necessarily  ceases  to 
be  negotiable,  does  not  impair  its  negotiability.^^" 

111  OSBORN  V.  HAWLEY,  19  Ohio,  130.  OVERTON  v.  TYLER,  3  Pa.  St. 
346,  contra.     See  Neg.  Inst.  L.  §  24,  subd.  2. 

112  ZIMMERMAN  v.  ANDERSON,  67  Pa.  St.  421  (distinguishing  OVERTON 
V.  TYLER,  supra);  FIRST  NAT  BANK  v.  SLAUGHTER,  98  Ala.  602,  14 
South.  545.     See  Neg.  Inst.  L.  §  24,  subd.  3. 

118  SPERRY  V.  HORR,  32  Iowa,  184;  FIRST  NAT.  BANK  v.  SLAUGHTER, 
supra;  STAPLETON  v.  BANKING  CO.,  95  Ga.  802,  23  S.  E.  81;  DORSEY  v. 
WOLFF.  142  111.  589,  32  N.  E.  495;  BROOKS  v.  HARGREAVES,  21  Mich.  254; 
Fralick  v.  Norton,  2  Mich.  130;  First  Nat.  Bank  v.  Carson,  60  Mich.  432,  27 
N.  W.  589;  Goodwin  v.  Goodwin,  65  111.  497;  GILLILAN  v.  MYERS,  31  111. 
525;  Kingsbury  v.  Wall,  68  111.  311;  Miller  v.  Stone  Co.,  1  111.  App.  273;  Hub- 
bard V.  Moseley,  11  Gray  (Mass.)  170;  COSTELO  v.  CROWELL,  127  Mass. 
293;  .TONES  v.  RADATZ,  27  Minn.  240,  6  N.  W.  800;  .Tohnston  Ilarvt'stor  Co. 
V.  Clark,  30  Minn.  308,  15  N.  W.  252.  FIRST  NAT.  BANK  v.  LARSEN,  60 
Wis.  206,  19  N.  W.  67,  contra.    See  Neg.  Inst.  L.  §  21,  subd.  5. 

11*  OVERTON  V.  TYLER,  supra. 

»i»  Mr.  Daniel  points  out  (Neg.  Inst.  [4th  Ed.]  §  62)  that  the  cases  concerntn;; 
the  validity  of  stipulations  for  payment  of  attorney's  fees  are  of  four  classi'.s: 
(1)  Those  which  sustain  their  validity,  as  well  as  the  negotiability  of  tlie  in- 
strument (SPERRY  T.  HORR,  supra);    (2)  those  which  sustain  the  validity  of 


62  OF    NEGOTIABLE    BILLS    AND    NOTES.  (Ch.   2 

Certainty  as  to  Amount  of  Money. 

The  last  of  the  series  of  principles  referring  to  the  payment  of 
money  is  that  the  order  or  promise  must  be  for  the  payment  of  a 
definite  sum  of  money.^^^  By  this  is  meant  tnat  it  must  specify 
exactly  the  su^  of  money  to  which  it  relates.  It  would  be  useless 
in  the  operations  of  discount  if  the  purchaser  were  obliged  to  have 
reference  to  extrinsic  facts  or  to  other  documents,  to  ascertain  its 
value.  And  accordingly,  in  the  leading  case  upon  the  point,^^'  where 
the  instrument  was  in  form  to  pay  £05,  "and  also  all  other  sums 
which  may  be  due,"  Lord  Ellenborough  declared  that  since  the  total 
sum  was  not  specified,  and  could  not  be  ascertained  otherwise  than 
by  reference  to  books  to  ascertain  the  amount  due,  and  the  whole 
constituted  one  entire  promise,  and  could  not  be  divided  into  parts^ 
the  instrument  was  too  indefinite  to  be  a  promissory  note.  And  the 
courts,  in  cases  of  orders  or  promises  to  pay  "whatever  sums  you 
may  collect,"  *^'  or  "the  demands  of  a  sick  club,"  ^^"  or  like  indefi- 
nite amounts,  have  wisely  denied  to  them  the  privilege  of  negoti- 
ability. This  rule  does  not,  however,  exclude  from  negotiability 
paper  with  such  terms  as~""^^wlLh  in(^resl/||J^''""or~"with  currenTex- 

the  stipulation,  but  not  the  negotiability  of  the  Instrument  (Johnston  Harvester 
Co.  v.  Clark,  supra);  (3)  those  which  deny  the  validity  of  the  stipulation,  but 
sustain  the  negotiability  of  the  Instrument  (GILMORE  v.  HIRST,  56  Kan.  620, 
44  Pac.  603,  stipulation  for  attorney's  fee  illegal  by  statute);  (4)  those  which 
hold  the  stipulation  void,  and  deny  the  negotiability  of  the  instrument  (BUL- 
LOCK T.  TAYLOR,  39  Mich.  137).  In  some  states  stipulations  for  payment  of 
attorney's  fees  are  declared  illegal  by  statute. 

ii«  Cushman  v.  Haynes,  20  Pick.  (Mass.)  132;  PHILADELPHIA  BANK 
V.  NEWKIRK.  2  Miles,  442;  DODGE  v.  EMERSON,  34  Me.  96;  Jones  v.  Simp- 
son. 2  Barn.  &  C.  318;  CLARKE  v.  PERCIVAL,  3  Barn.  &  Adol.  660;  Aurey 
r.  Fearnsides,  4  Mees.  &  W,  168.  An  obligation  to  pay  "either  £225  sterling 
or  $1,000  lawful  money  of  the  United  States  of  America,  to  wit,  £225  sterling 
if  the  principal  and  interest  are  payable  in  London,  and  $1,000  lawful  money 
of  the  United  States  of  America  if  the  principal  and  interest  are  payable  In 
New  York,"  is  not  negotiable.  PARSONS  v.  JACKSON,  99  U.  S.  434.  See 
Neg.  Inst.  L.  §  20,  subd.  2. 

1"  SMITH  V.  NIGHTINGALE,  2  Starkie.  375. 

118  Legro  V.  Staples,  16  Me.  252. 

119  Bolton  V.  Dugdale,  4  Barn.  &  Adol.  619. 

120  A  provision  for  a  higher  rate  of  interest  in  case  of  nonpayment  at  ma- 
turity does  not  Impair  the  negotiability.    SMITH  v.  CRANE,  33  Minn.  144,  22 


§§  21-25)  PAYMENT   OF    MONEY   ONLY.  53 

change."  "*  The  canon  of  construction  is,  *1d  certum  est  quod 
certum  reddi  potest."  And  in  such  instruments  the  mere  inspection 
of  the  paper  itself  enables  the  holder,  by  an  almost  mechanical  com- 
putation, to  ascertain  just  what  sum  is  due  upon  it  at  any  given  time. 
And  therefore  such  instruments  may  be  deemed  to  specify  a  given 
sum  of  money  as  definitely  as  though  they  had  stated  the  interest 
or  the  exchange  in  figures  themselves.^ ^^  Of  course  it  may  be  urged, 
and  in  fact,  by  text  writers,^  ^^  has  been  urged,  that  an  instrument 
payable  with  current  exchange  is  invalid  because  the  fluctuations 
in  the  rate  of  exchange  make  it  impossible  to  ascertain  the  amount 
payable  when  the  bill  is  issued,  and  because  proving  the  meaning 
of  "with  current  exchange"  necessitates  evidence  outside  of  the  in- 
strument. But  these  views  thus  taken  are  rather  of  the  letter  of 
the  law  than  of  its  spirit.  The  law  merchant  is  the  result  of  the 
custom  of  merchants,  and  the  statute  of  Anne  is  the  result  of  the 
law  merchant.  It  is  the  custom,  convenience,  and  sound  business 
policy  of  merchants  to  induct  into  negotiable  instruments  the  theory 
of  exchange,  and  this  reason,  therefore,  if  no  other,  makes  exchange 
a  necessary  modification  of  the  general  rule  we  have  laid  down. 

N.  W.  633;  PARKER  v.  PLYMELL,  23  Kan.  402.  Hegeler  v.  Comstock,  1 
S.  D.  138.  45  N.  W.  331,  contra.     See  Neg.  Inst.  L.  §  21,  subd.  1. 

121  The  fact  that  an  instrument  for  the  payment  of  a  specific  sum  of  money 
is  made  payable  with  "current  exchange"  on  some  other  place  than  the  place 
of  payment  does  not  prevent  Its  being  a  promissory  note.  HASTINGS  v. 
THOMPSON,  54  Minn.  184,  55  N.  W.  968;  Johns.  Cas.  Bills  &  N.  33.  See, 
also,  SMITH  v.  KENDALL,  9  Mich.  241;  JOHNSON  v.  FRISBIE,  15  Mich. 
286.  There  have,  however,  been  contrary  holdings  as  to  this  point,  as  In  the 
case  of  PHILADELPHIA  BANK  v.  NEWKIRK,  2  Miles,  442;  Windsor  Sav. 
Bank  v.  McMahon  (C.  C.)  38  Fed.  283;  Second  Nat.  Bank  v.  Basiner,  12  O. 
C.  A.  517,  65  Fed.  58.  In  FIRST  NAT.  BANK  v.  SLETTE,  67  Minn.  425.  69  N. 
W.  1148,  It  was  held  that  an  instrument,  not  payable  at  any  particular  place, 
promising  to  pay  $1,673,  "payable  by  New  York  or  Chicago  exchange,"  could 
not  be  construed  as  a  promise  to  pay  In  money  $1,673,  with  exchange,  and 
hence,  not  being  payable  In  money,  was  not  negotiable.  Distinguishing  HAST- 
INGS V.  THOMPSON,  supra.     See  Neg.  Inst.  L.  §  21,  subd.  4. 

122  SMITH  V.  KENDALL,  9  Mich.  241;  Grutacap  v.  Woulluise,  2  McLean, 
581,  PY^d.  Cas.  No.  5,854;   LEGGE'rT  v.  JONES,  10  Wis.  34. 

i28Edvv.  Neg.  Inst.  §  154;  BenJ.  Chalmers,  p.  18,  and  decisions;  LOWE  v. 
BLISS.  24  111.  168;  PHILADELPHIA  BANK  V.  NEWKIKK.  2  Miles.  442; 
READ  V.  McNULTY,  12  Rich.  Law  (S.  C.)  445. 


54  OF   NEGOTIABLE    BILLS    AND    NOTES.  (Ch.   2 

^  SPECIFICATION  OF  PARTIES. 

26.  The  instrument  must  be  specific  as  to  all  its  parties, 

27.  By  signature  is  meant  any  written  emblem  made  by 
A  person  witii  the  intent  of  entering  into  a  contract  ob- 
ligation. 

28.  The  note  or  bill  must  contain  the  signature  of  the 
m.aker   or  makers,  dra"V7er   or  drawers. 

29    The  bill  must  be  addressed  to  some  person. 

EXCEPTIONS — (a)  If  the    drawee    can    be    otherwise 

sufficiently  identified  from  the  bill  it  is  sufficient. 
(b)  An   unaddressed  bill  accepted  or  a  bill  accepted, 

where  the  draw^er  and  acceptor  are  one  and  the 

same  person,   is   to   be  treated  as  a  promissory 

note,  and  is  negotiable. 

30.  The  bill  or  note  must  point  out  some  person  to 
w^hom  the  money  is  to  be  paid. 

The  following  are  the  common  rules  concerning  the 
nomination  of  payees: 

(a)  The  payee  of  an   instrument,  except  one  payable 

to  bearer,  must  be  a  person  in  being,  natural  or 
legal,  and  ascertainable,  at  the  time  of  issue. 

(b)  "Where   the  payee   and   maker   or  draw^er  are  the 

same  person,  the  instrument  is  not  issued  until 
after  its  indorsement  and  delivery. 

(c)  The  payee  may  be  a  fictitious  or  nonexisting  per- 

son, but  the  instrument  is  then  construed  as  pay- 
able to  bearer,  and  title  thereto  is  made  by  es- 
toppel. 

Definition  of  Parties. 

In  the  acceptation  of  the  term  as  hereinafter  applied  to  "parties," 
the  meaning  of  the  word  "parties"  is  somewhat  more  narrow  thau 
its  strict  legal  one.  In  its  strict  legal  definition  a  party  to  a  con- 
tract is  one  to  whom  its  operation  as  a  legal  contract  is  confined. 


§§  26-30)  SPECIFICATION    OF    PARTIES.  55 

And  while  the  holder  of  a  bill  or  note  indorsed  in  blank,  or  made 
payable  to  bearer,  or  claiming  it  under  equitable  assignment,  is  in 
the  widest  sense  of  the  word  no  less  a  party  to  it  than  any  of  its 
actual  indorsers,  still  the  courts  usually  designate  as  "parties"  only 
those  who  appear  by  name  on  the  face  or  back  of  the  instrument. 

Signature  of  Parties. 

A  person  is  made  a  party  by  his  signifying  by  his  signature  or 
some  other  written  emblem  upon  the  instrument  that  he  intends  to 
be  bound  by  the  instrument.^^*  A  signature  in  pencil,^^''  a  signa- 
ture made  by  another  person  but  attested  by  a  mark,^^"  an  indorse- 
ment upon  the  back  of  the  note  in  form  "1,  2,  8,"  made  with  the  in- 
tention of  indorsing,^*''  are  such  evidences  of  intention.  The  ques- 
tion is  whether  the  signer  intended  to  bind  himself  or  not.^^*  As 
matter  of  theory  and  of  law,  and  for  the  reason  that  the  note  being 
an  evidence  of  obligation  should  point  out  on  its  face  the  party  who 
primarily  assumes  that  obligation,  it  ia  ripppssnry  that  there  should 
beL^  drawer  or  maker  somewhere  specified  in  the  instrument.  But 
as  long  as  the  signature  or  emblem  of  the  drawer  or  maker  appears 
anywhere  upon  the  instrument  it  is  deemed  prima  facie  evidence 
of  his  intention  to  be  bound  by  its  obligation.^^®     It  is  immaterial 

12*  See  Neg.  Inst.  L.  §  20,  subd.  1. 

126  GEARY  V.  PHYSIC,  5  Barn.  &  C.  234;  REED  v.  ROARK,  14  Tex.  329; 
BAKER  V.  DENING,  8  AdoL  &  E.  94. 

126  GEORGE  V.  SURREY,  Moody  &  M.  516;  SHANK  v.  BUTSCH,  28  Ind.  19. 

127  BROWN  V.  BANK,  6  Hill,  443. 

128  Selby  V.  Selby,  3  Mer.  2;  Lucas  v.  James,  7  Hare,  419;  Boardman  v. 
Spooner,  13  Allen  (Mass.)  353;  BRAYLEY  v.  KELLY,  25  Minn.  IGO. 

i2»  Palmer  v.  Stephens,  1  Denlo,  471;  MERCHANTS'  BANK  v.  SPICER,  6 
Wend.  (N.  Y.)  443.  The  payment  by  the  drawee  of  a  bill  of  exchange  is  an 
admission  of  the  drawer's  sij^uature,  which  he  may  not  afterwards  dispute,  as 
between  himself  and  the  holder;  and  he  cannot  compel  the  holder  to  whom  he 
has  paid  the  bill  to  return  the  sum  paid,  where  the  drawer's  signature  is  dis- 
covered to  be  a  forgery.  BANK  OF  COMMERCE  v.  UNION  BANK.  3  N.  Y 
230;  PRICE  v.  NEAL,  3  Burrows,  1354.  Such  payment,  however.  Is  not  an 
admission  of  the  genuineness  of  the  body  of  the  bill.  BANK  OF  COMMKKCE 
V.  UNION  BANK,  supra.  As  to  the  effect  of  a  signature  made  in  tlie  presence 
of  the  owner,  and  by  his  authority,  see  Sager  v.  Tupper.  42  Mich.  (505,  4  N.  W. 
555;  Coy  v.  Stiner,  53  Mich.  42,  18  N.  W.  552.  As  to  the  efToct  of  acknowl- 
edging a  forged  signature,  see  Phillips  v.  Ford,  9  Pick.  (MubS.)  39;  WELLING- 
TON V.  JACKSON,  121  Mass.  157. 


56  OF    NEGOTIABLE    BILLS   AND    NOTES.  (Ch.   2 

in  wlmt  part  of  the  instrument  the  aame-^t^onrw,  whot1ini:_at_^e 
top,  in  the  middle,  or  at  the  bottom^""  Anything  from  which  it  will 
apix\Tr  that  a  person  intended  to  make  the  instrument  his  own  is 
suftieient."^  Where  a  note  is  signed  by  two  or  more  persons,  if  it 
contains  the  words  "we  promise  to  pay,"  it  is  joint;  ^*^  but,  if  it 
contains  the  words  '1.  promise  to  pay,"  it  is  joint  and  several/^* 

Certahify  as  to  Parties — Maker — Braiver, 

The  parties  to  a  bill  or  note  must  appear  on  the  face  of  the  instni- 
ment,  andmust  be^ertain:  Thus  an  iusLruinenFwhereby  A  prom- 
ises to  pay,nBut  which  is  signed  "A  or  else  B,"  is  not  a  promissory 
note.^'*  A  promissory  note  without  a  maker,  or  a  bill  of^exehange 
wit^HwUulrawer,  is  an  impossibility.^"  In  McCALL  v.  TAYLOR  ^'* 
an  instrument  was  written  in  the  following  form:  "Four  months 
flfter  date,  pay  to  my  order  the  sum  of  £300,  for  value  received.  To 
Captain  Taylor,  ship  'Jasper.' "  There  was  no  signature  of  any 
drawer;  but  written  across  the  instrument  by  the  defendant  were 
these  words:  "Accepted,  William  Taylor."  It  was  held  that  this 
could  not  be  declared  on  either  as  a  bill  or  as  a  note,  since  it  was 
jnly  an  inchoate  and  imperfect  instrument.  This  instrument  was 
also  imperfect  because  it  lacked  a  payee;  but,  had  a  payee  been 
designated,  it  would,  by  virtue  of  the  acceptance,  have  been  good 
as  a  promissory  note,  as  will  be  explained  in  the  next  paragraph. 
Moreover,  had  the  instrument  designated  a  payee,  the  acceptance 

180  Clason  v.  Bailey,  14  Johns.  485;  Saunderson  v.  Jackson,  2  Bos.  &  P.  238; 
Welford  v.  Beazely,  3  Atk.  503. 

131  In  the  case  of  TAYLOR  v.  DOBBINS,  it  was  held  that  the  allegation  that 
the  note  was  that  of  the  defendant,  and  that  "manu  sua  propria  scrlpsit"  was 
sufBcient  without  his  signature  at  the  end,  since  his  name  appeared  in  the 
instrument.     1  Strange,  399. 

132  Barnett  v.  Juday,  38  Ind.  86;  Groves  v.  Sentell,  153  U.  S.  465,  14  Sup. 
Ct.  898. 

183  CHAFFEE  V.  JONES,  19  Pick.  (Mass.)  2G3;  Ely  v,  Clute.  19  Hun  (N.  Y.) 
35;  Salomon  v.  Hopkins,  61  Ck)nn.  49,  23  Atl.  716;  Dill  v.  White,  52  Wis.  456, 
9  N.  W.  404.     See  Neg.  Inst.  Law,  §  36,  subd.  7. 

184  FERPJS  V.  BOND,  4  Barn.  &  Aid.  679. 

186  vyse  V.  Clarke,  5  Car.  &  P.  403;  May  v.  Miller.  27  Ala,  515;  Tevis  v. 
Young,  1  Mete.  (Ky.)  197;  REG.  v.  HARPER,  13  Cent.  Law  J.  174;  STOES- 
SIGER  V.  RAILWAY  CO.,  3  EL  &  BL  549,  23  Law  J.  Q.  B.  293. 

188  34  Law  J.  C.  P.  365. 


§§  26-30)  SPECIFICATION    OF    PARTIES.  57 

and  delivery  by  the  acceptor  would  have  operated  as  authority  to 
the  payee  or  other  legal  holder  to  insert  his  own  name  as  drawer, 
and  thus  to  perfect  the  instrument  as  a  bill  of  exchange.  Such  im- 
plied authority  results  from  the  fact  that  the  instrument  is  delivered 
by  the  acceptor,  who  must  be  taken  to  intend  the  natural  conse- 
quence of  his  act,  in  order  that  it  may  be  put  into  circulation,  which 
cannot  be  completely  accomplished  without  perfecting  it  in  the  man- 
ner indicated.^"'' 

Designation  of  Drawee. 

So,  also,  without  a  drawee,  an  instrument  cannot  hp  a  hill -/if 
exchange.  The  reason  for  this  is  that  the  first  essential  of  a  bill  is 
an  order^  aiid,  a  drawee  not  being  nominated,  the  instrument  must 
fail.^*^  It  is  inherent  in  its  nature  that  there  must  be  a  drawee, 
who  in  theory  has  funds  of  the  drawer,  which  he  is  bound  to  apply 
upon  the  draft.  tHiq  pnnrts,  however,  are  frequently  able  to  sustain 
as  a  promissory  note  an  instrument  whi^^*  fnr  iqpir  nf  n  HmTrnn  in 
jmj^prfppt  agja  bill  of  exchange;  for,  where  the  essentials  of  a  note 
are  present,  the  courts  will  enforce  the  obligation  in  spite  of  formal 
inaccuracies.  In  PETO  v.  REYNOLDS,^^^  where  an  instrument 
otherwise  in  the  form  of  a  bill  was  not  addressed  to  any  one,  but 
across  the  face  was  written  "Accepted,"  over  what  purported  to  be 
the  defendant's  signature,  Barons  Parke  and  Alderson  both  agreed 
that,  while  they  could  not  treat  the  instrument  as  a  bill,  because  of 
the  absence  of  the  drawee's  name,  they  would,  on  proof  of  the  de- 
fendant's signature,  hold  it  to  be  a  promissory  note.  This  is  the 
principle  of  BLOCK  v.  BELL,^**  where  an  instrument  in  the  form 
of  a  promissory  note  was  not  signed  at  the  foot,  but  was  addressed 
to  the  defendant,  who  wrote  across  it  "Accepted,"  and  signed  his 
name  thereunder.     It  was  held  that  this  signature,  though  in  terms 

187  HARVEY  V.  CANE,  34  Law  T.  (N.  S.)  64.  In  this  case  the  bill  without 
the  name  of  the  drawer  was  accepted  by  the  defendant,  and  given  by  him  to 
C,  by  whom  It  was  given  to  the  plaintiff,  who  Inserted  his  own  name.  It  was 
held  that  the  acceptance  was  with  a  view  to  negotiation,  and  that  C.  gave  wliat 
autlujrity  he  had  to  tlie  plaintiff.  See  MOIESE  v.  KNAPP,  30  Ga.  942; 
UOPPS  V.  SAVAGE,  G9  Md.  51G,  16  Atl.  133. 

188  See  Neg.  Inst.  L.  §  20.  subd.  5. 
188  9  Eich.  410. 

1*0  1  Moody  &  R.  149. 


68  OF    NEGOTIABLE    BILLS    AND    NOTES.  (Ch.  2 

an  acceptance,  acted  as  an  adoption  of  the  promise,  and  that  the 
instrument  was  a  promissory  note.  And  the  courts  have  even  gone 
so  far  as  to  say  that,  if  the  drawee  be  not  specified  in  the  bill,  but 
be  otherwise  capable  of  identification  from  it,  that  will  suflSce.  In 
GRAY  V.  MILNER,'"  the  bill  was  addressed,  'Tayable  at  No.  1  Wil- 
mot  St.,  opposite  the  Lamb,  Betlmal  Green,  London,"  and  the  argu- 
ment was  that,  not  being  addressed  to  any  one,  it  was  not  a  bill 
of  exchange.  It  appeared,  however,  in  answer  to  this,  that  "Ac- 
cepted. Chas.  Milner"  was  written  across  the  face  of  the  bill.  The 
court  held  that  this  was  a  bill  of  exchange;  Dallas,  J.,  saying  that 
the  direction  to  a  particular  place  could  only  mean  to  the  person 
who  resided  there,  and  that  the  defendant,  by  accepting  it,  acknowl- 
edged that  he  was  the  person  to  whom  it  was  directed.  Of  GRAY 
V.  MIIJSIER  it  may  be  said  that  it  can  only  be  supported  upon  the 
theory  that  a  bill  of  exchange  made  payable  at  a  particular  place 
of  residence  or  of  business  can  only  be  meant  to  be  addressed  to 
the  person  who  resides  or  does  business  at  that  place.  But  it  may 
also  be  said  that  such  is  certainly  a  very  strained  construction  of 
the  law,^*^  and  it  is  to  be  questioned  whether  the  courts  would 
to-day  adopt  such  a  view  of  this  rule  if  the  case  were  presented  to 
them  afresh.^*^  It  would  seem,  rather,  subject  to  the  rule  of  inter- 
pretation governing  ambiguous  instruments,  that  its  acceptance 
must  evidence  an  intention  to  incur  an  obligation,  and  although 
it  did  not  fulfill  the  requisites  of  a  bill  of  exchange,  the  holder  might 
treat  it  as  a  promissory  note,^**  and  the  courts  would  clearly  give 
it  effect  as  such.     The  principle  is  the  same  where  the  drawer  and 

1*1  8  Taunt.  739.  An  action  was  brought  on  the  following  writing:  "Oct. 
21,  1804.  Two  months  after  date,  pay  to  the  order  of  John  Jenkins  £78,  lis., 
value  received.  Thos.  Stephens.  At  Messrs.  John  Morson  &  Co."  It  was  held 
that  the  instrument  was  a  bill  of  exchange,  and  that  Morson  &  Co.  could  be 
considered  the  drawees.     SHUTTLEWORTH  v.  STEPHENS,  1  Camp.  407. 

142  DAVIS  y.  CLARKE,  6  Q.  B.  16;  Story,  Bills  (Bennett's  Ed.)  58;  1  Pars. 
Notes  &  B.  G2. 

143  BALL  V.  ALLEN,  15  Mass.  435;  WATROUS  v.  HALBROOK,  39  Tex.  572. 

144  EDIS  V.  BURY,  6  Barn.  &  C.  433;  BLOCK  v.  BELL,  1  Moody  &  R.  149; 
DRUMMONT)  v.  DRUMMONT),  reported  in  1  Ames,  Cas.  Bills  &  N.  p.  883, 
though  see,  contra,  Shuttleworth  v.  Stephens,  1  Camp.  407;  ALLAN  v.  MAW- 
SON,  4  Camp.  115;  Rex  v.  Hunter,  Riiss.  &  R.  511;  FUNK  v.  BABBITT,  156 
lU.  408.  41  N.  E.  166.     See  Neg.  Inst.  L.  §  36,  subd.  5;  Id.    S  214. 


§§  26-30)  SPECIFICATION    OF    PARTIES.  5S 

drawee  are  ostensibly  different,  though  in  law  the  same  person.  In 
Fairchild  v.  Ogdensburgh  R.  Co.,^*''  the  instrument  was  an  order 
drawn  bj  the  president  of  the  roailroad  upon  its  treasurer  directing 
the  latter  to  pay  A  B,  or  order,  a  certain  sum  of  money,  and  was, 
in  effect,  an  order  of  the  corporation  upon  itself.  Here  the  court  of 
appeals  said,  because  there  were  not  the  two  parties  requisite  for 
a  bill  of  exchange,  the  instrument  was  not  a  bill  of  exchange,  but, 
following  the  authority  of  the  English  courts,  that  it  was  a  prom- 
issory note. 

Designation  of  Payee. 

Tf^'si  liliewise  epseutinl  to  a  bill  of  exchange  or  promissory  nntp  flint 
a  pnjp^hP  dPsio-nnfpd  thPrPin  i-t«  In  GIBSON  V.  MINET,^*^  Chief 
Baron  Eyre  declared:  "If  I  put  in  writing  these  words:  'I  promise 
to  pay  £500  on  demand,  value  received,'  without  saying  to  whom^ 
it  is  waste  paper.  If  I  direct  another  to  pay  £500  at  some  day  after 
date,  for  value  received,  and  not  say  to  whom,  it  is  waste  paper."  *** 
The  payee  must  be  certain;  but  any  words  which  with  reasonable 
certainty  designate  a  person  as  payee  are  enough.  An  acknowl- 
edgment of  a  balance  due  A,  for  which  "I  promise  to  pay,"  is  a 
promise  to  pay  A.^**  It  is  not  necessary,  moreover,  that  the  designa- 
tion be  by  name,  but  a  description  of  the  payee  is  sufficient.^  ^** 
"Bearer"  is  a  sufficient  designation;  ^^'^    and,  somewhat  analogously, 

1*5  15  N.  Y.  337. 

148  Rex  V.  Randall,  Russ.  &  R.  195;  McINTOSH  v.  LYTLE.  26  Minn.  3.39,  3 
N.  W.  983.  See,  also,  TITTLE  v.  THOMAS,  30  Miss.  125;  Bennington  v.  Dins- 
more,  2  Gill  (Md.)  348;  RICH  v.  STARBUCK,  51  Ind.  87;  Storm  v.  Stilling, 
3  El.  &  Bl.  832;  ADAMS  v.  KING,  16  111.  169;  GRAY  v.  BOWDEN,  23  Tick. 
(Mass.)  282;  Osgood  v.  Pearsons,  4  Gray  (Mass.)  455.  "To  Charles  R.  Whitesell 
et  al.  or  order"  is  bad  for  uncertainty.  GORDON  v.  ANDERSON,  83  Iowa. 
224.  49  N.  W.  86.  "To  the  order  of  A"  is  good.  FISHER  v.  POMFRET,  12 
Mod.  125.     See  Neg.  Inst.  L.  §  20,  subd.  4;   Id.    §§  27,  28. 

147  1  H.  Bl.  618. 

14S  Walrad  v.  Petrie.  4  Wend.  (N.  Y.)  576;  FERRIS  v.  BONT).  4  Barn.  &  Aid. 
697;  DouRlass  v.  Wilkeson,  6  Wend.  («7;   IIcMnan  v.  Francisco,  12  Mo.  A\>\).  5(>(). 

i4»  CIIADWICK  V.  ALLEN,  1  Strange,  706. 

iBo  Daniel,  Neg.  Inst.  §  99. 

161  OthfT  words  which  indicate  that  the  instrument  Is  to  be  transferable  by 
delivery  have  been  construed  as  entitled  to  the  same  effect.  "Holder,"— 
PUTNAM  V.  CRYMES,  1  McMul.  (S.  C.)  9;  "bills  payable."- WILLinS  v. 
BANK,  2  Duer  (N.  Y.)  121;  Mechanics'  Bank  v.  Strailoii,  ♦i:i  N.  Y.  365;   "order 


60  OF    NKQOTIABLE    BILLS    AND    NOTES.  (Ch.   2 

it  is  held  that  a  bi]l^or  note  is  good  if  a  blank  space  is  left  for  inser- 
tion of^the  name,  the  issue  of  the  instrument  in  this  form"  operating 
as  authority  to  any  bona  fide  holder  to  insert  his  name.^"  The 
payee  may  be  designated  by  his  office.  Thus  "the  trustees  of  the 
will  of  A,"  or  "the  administrators  of  the  estate  of  A,"  are  sufficient 
descriptions,  since  the  payees  are  ascertainable.^""  The  person  des- 
ignated, however,  must  have  a  natural  or  legal  existence.  For  this 
reason  a  promise  to  pay  to  "the  estate  of  Moses  Lyon,  deceased,"  has 
been  held  bad.^"*  Not  unlike  this  case  is  COWTE  v.  STIR- 
LING,*'"' where  a  note  was  made  payable  nine  months  after  date 
"to  the  secretary  for  the  time  being''  of  a  certain  society.  This  was 
construed  as  a  promise  to  pay  to  the  person  who  should  be  secretary 
nine  months  thence,  and,  inasmuch  as  it  could  not  be  ascertained 
at  the  date  of  issue  who  that  person  would  be,  it  was  held  that  the 
instrument  could  not  take  effect  as  a  note. 

An  order  or  promise  to  pay  to  A  or  B  is  not  a  bill  or  a  note, 
because  the  instrument  is  payable  to  either,  and  that  only  on  the 
contingency  of  its  not  being  paid  to  the  other.^'^*  But  such  instru- 
ments are  to  be  distinguished  from  those  in  which  the  designation 
of  the  payees,  though  alternative  in  form,  is  not  such  in  fact,  as  in 

of  1658,"— WILLETS  v.  BiiJS'K,  supra;  "to  J.  S.  or  ship  Fortune  or  bearer," 
—GRANT  V.  VAUGHAN..  3  Burrows,  1526.     See  Neg.  Inst.  L.  §  28,  subd.  4. 

152  CRUCHLEY  v.  CLARANCE,  2  Maule  &  S.  90;  Rand.  Com.  Paper,  §  167. 
Post,  p.  258. 

188  Administrators  of  A,  deceased,  ADAMS  y.  KING,  16  111.  169;  MOODY 
y.  THREKELD,  13  Ga.  55;  or  to  trustees  of  the  will  of  A,  MEGGINSON  v. 
HARPER,  2  Cromp.  &  M.  322;  or  the  heirs  of  A,  Bacon  v.  Fitch,  1  Root  (Conn.) 
181.     See  Neg.  Inst.  L.  §  27,  subd.  6. 

164  Hendricks  v.  Thornton,  45  Ala.  309.  See,  also,  LYON  y.  MARSHALL, 
11  Barb.  (N.  Y.)  242.  But  in  SHAW  v.  SMITH,  150  Mass.  166,  22  N.  E.  887, 
"Pay  to  F.  B.  Bridgman's  estate  or  order"  was  construed  as  an  order  to  pay 
to  the  administrators,— a  construction  which  is  certainly  according  to  the  com- 
mon acceptance  of  the  words  used. 

168  6  El.  &  Bl.  333. 

158  BLANCKENHAGEN  v.  BLUNDELL,  2  Barn.  &  Aid.  417;  MUSSELMAN 
y.  OAKES,  19  111.  81.  Neg.  Inst.  L.  §  27,  provides  that  the  instrument  may  be 
drawn  payable  to  the  order  of  "one  or  some  of  several  payees."  This  seems 
to  change  the  law.  But  quaere  whether  it  does  more  than  provide  for  such 
cases  as  WATSON  r.  EVANS,  infra. 


§§  26-30)  SPECIFICATION    OF    PARTIES.  61 

DAVIS  V.  GAEK,^''  where  the  promise  was  to  pay  "Joseph  M.  Whit- 
ney, Charles  A.  Davis,  and  Louis  McLane,  Trustees  of  the  Apalach- 
icola  Land  Company,  or  their  successors  in  office,  or  order."  It  was 
held  that  the  designation  was  not  uncertain,  since  payment  could 
be  made  to  the  "successors"  only  in  case  the  trustees  named  had 
ceased  to  be  such;  and  the  ambiguity,  if  any,  would  arise  from  a 
chauge  of  trustees  after  the  note  took  effect.  So  a  note  was  held 
good  where  the  promise  was  "to  pay  A,  B,  and  C,  or  their  order,  or 
the  major  part  of  them."  ^°^  This  was  construed  as  a  promise  to 
pay  to  all  three,  or  to  the  order  of  all  three  or  of  any  two,  the  effect 
being  that  A,  B,  and  C  were  joint  payees,  but  that  any  two  were 
authorized  to  sign  for  all.  On  the  same  principle  the  payee  was 
held  certain  in  a  note  payable  "to  the  trustees  of  the  Methodist 
Episcopal  Church,  or  their  collector,"  the  court  observing  that  the 
rule  prohibiting  alternative  payees  does  not  apply  "where  the  in- 
strument discloses  the  fact  that  one  of  the  two  persons  named  is 
named  as  the  agent  of  the  other  to  receive  the  money."  ^^^ 

An_jnajxiimpnt  ]j\  fh"  ^^''"t  r,f  a  t^^Ip  made  payable  to  the  order 

of  t^V|pjT2gJ£Ar^  "T-  in  fbp  form  nf  a  hill  whprp  thp  pnypp  .qnd  acceptor 
are  onpgnd  thp  snmp  pprsnn^  ia  innpprativp  nw  n  nntn  ni'-hill.  Since 
a  man  cannot  contract  with  himself,  such  a  writing,  unnegotiated, 
gives  rise  to  no  obligation.  If,  however,  the  payee  negotiates  the 
instrument,  it  becomes  by  his  indorsement  a  valid  note  or  bill  in 
ihe  hands  of  the  holder,  the  original  contract  and  the  indorsement 
taken  together  becoming  a  binding  contract,  though  an  informal 
one,  between  the  maker  or  acceptor  and  the  indorsee.^*" 

Fictitious  Payee, 

Bills  and  notes  are  sometimes  made  payable  to  the  order  of  a  ficti- 
tious payee;    and  where  such  an  instrument,  purporting  to  be  in- 

loT  6  N.  Y.  124.  To  the  same  effect,  KING  v.  BOX,  6  Taunt.  325.  So  of  a 
promise  to  pay  "A  or  heirs."     KNIGHT  v.  JONES,  21  Mich.  161. 

108  WATSON  V.  EVANS,  1  Hurl.  &  C.  6G2. 

i5»N0X0N  T.  SMITH,  127  Mass.  485.  To  the  same  effect,  HOLMES  t. 
JAQUES.  L.  R.  1  Q.  B.  376. 

180  Hooper  V.  Williams,  2  Eich.  18;  MOSES  v.  BANK,  149  U.  S.  298,  13 
Sup.  Ct.  900.  So  where  drawer,  acceptor,  and  payee  were  one  and  the  same. 
See  Nog.  Inst.  L.  §  27.  subd.  2.  C£.  §  320.  COM.  v.  BUTrEKIOK.  100  Maas. 
12.     Neg.  Inst.  L.  §  27,  subd.  3. 


62  OF    NEGOTIABLE    BILLS    AND    NOTES.  (Cll.    2 

(lorsed  by  the  person  named  as  payee,  passes  into  the  hands  of  an 
innocent  holder,  the  question  arises  as  to  what  are  his  rights  as 
n;,'ainst  the  original  parties.  The  rule  to  be  deduced  from  the  au- 
thorities is  that  as  against  an  acceptor,  drawer,  or  maker,  who  had 
knowledge  of  the  fictitious  character  of  the  payee,  such  an  instru- 
ment, in  the  hands  of  an  innocent  holder,  may  be  treated  as  valid, 
and  (somewhat  anomalously)  as  if  payable  to  bearer;  but  that,  if 
the  origiual  party  was  ignorant  of  the  fictitious  character,  he  can- 
not be  charged.^®^  Thus  the  principle  of  liability  in  such  case  rests 
on  estoupel.  Again,  if  the  holder,  when  he  received  the  instru- 
ment, knew  that  the  name  of  the  payee,  and  consequently  the  in- 
dorsement, was  fictitious,  he  cannot  recover  against  the  acceptor 
or  maker,  although  the  latter  had  knowledge  of  the  facts  when  he 
accepted  the  bill  or  made  the  note.^^^  The  last  branch  of  the  rule 
has  been  changed  in  some  jurisdictions  by  legislation,  which  pro- 
vides that  a  note  payable  to  the  order  of  a  fictitious  person  shall, 
if  negotiated,  have  the  same  effect,  as  against  persons  having  knowl- 
edge of  the  facts,  as  if  payable  to  bearer.^ °^     Such  appears  to  be 

181  MINET  V.  GIBSON,  3  Term  R.  481,  affirmed  house  of  lords,  1  H.  Bl.  569; 
BENNETT  v.  FARNELL,  1  Camp.  130,  ISO;  ARMSTRONG  v.  BANK,  46  Ohio 
St.  512,  22  N.  E.  8G6;  SHIPMAN  v.  BANK,  126  N.  Y.  318,  27  N.  E.  371.  But 
see  Lane  v.  Krekle,  22  Iowa,  399;    Ort  v.  Fowler,  31  Kan.  478,  2  Pac.  580. 

182  HUNTER  V.  JEFFERY,  Peake.  Add.  Gas.  146;  Rand.  Com.  Paper  (2d 
Ed.)  §  163. 

188  In  New  York  this  doctrine  was  chanjjed  by  statute  to  the  effect  that  a 
note  "made  payable  to  the  order  of  the  maker  thereof,  or  to  the  order  of  a  fic- 
titious person,  shall,  if  negotiated  by  the  maker,  have  the  same  effect  and  be 
of  the  same  validity,  as  against  the  maker  and  all  persons  having  knowledge 
of  the  facts,  as  If  payable  to  the  bearer."  This  statute,  the  spirit  of  which 
has  been  followed  in  other  jurisdictions  (FOSTER  v.  SHATTUCK,  2  N.  H. 
446),  was  extended  in  New  York  in  its  operation.  In  Mechanics'  Bank  v.  Strai- 
ten, 3  Abb.  Dec.  269,  the  check  In  suit  was  demurred  to  because  it  was  in  form: 
"Pay  to  bills  payable,  or  order."  It  was  declared  by  the  general  term  of  the 
supreme  court  to  be  nonnegotiable,  but  the  court  of  appeals  said  that  by  using 
the  words  "or  order"  the  maker  showed  he  intended  that  the  instrument 
should  be  transferred,  and  be  negotiable.  In  naming  the  persons  to  whose  or- 
der the  Instrument  is  payable  the  maker  limits  the  negotiability  to  those  per- 
sons, and  Imposes  the  condition  of  Indorsement  upon  them  upon  Its  first  trans- 
fer. But  no  such  Intention  Is  indicated  by  a  fictitious  or  an. impersonal  payee; 
hence  words  of  negotiability,  in  such  connection,  are  capable  of  no  reasonable 


§§  31-32)  CAPACITY    OF    PARTIES.  63 

the  effect  of  the  ''Negotiable  Instruments  Law,"  "*  which  provides 
that  "the  instrument  is  payable  to  bearer  •  ♦  •  when  it  is  pay- 
able to  the  order  of  a  fictitious  or  non-existing  person,  and  such  fact 
was  known  to  the  person  making  it  so  payable."  On  the  other  hand, 
the  English  "Bills  of  Exchange  Act"  provides,  without  qualification, 
that,  "where  the  payee  is  a  fictitious  or  non-existing  person,  the  bill 
may  be  treated  as  payable  to  bearer."  ^•* 


CAPACITY  OF  PARTIES. 

31.  The  capacity  of  parties  is  in  general  governed  by 
the  same  rules  as  their  po-wrer  to  make  a  contract.  It  is 
of  two  kinds: 

(a)  Capacity  to  incur  liability, 

(b)  Capacity  to  transfer  the  instrument. 

32.  The  following  classes  of  persons  incur  no  liability, 
though  they  may  make  a  valid  transfer  of  the  instrum.ent: 

(a)  A  person  non  compos  mentis.  ^^ 

(b)  An  infant.  1^ 

(c)  In  some  jurisdictions,  a  married  w^oman.^^ 

(d)  A  corporation,  when  the  act  is  ultra  vires.'" 

Interpretation  except  that  the  bill  shall  be  negotiable  without  Indorsement. 
In  other  words,  it  is  to  be  treated  in  the  same  manner  as  if  it  had  been  made 
payable  to  bearer.  In  Irving  Nat.  Bank  v.  Alley,  79  N.  Y.  53G,  the  court  went 
further.  It  held  that,  even  where  a  party  upon  a  note  of  this  character,  against 
whom  a  liability  is  sought  to  be  enforced,  does  not  have  linowledge  of  the  facts, 
in  all  other  cases  than  that  of  the  fictitious  payee,  he  cannot  raise  the  point 
that  it  was  payable  to  the  maker's  or  drawer's  order,  but  will  be  estopped  from 
doing  so.    Thus  the  old  common  law  is  substantially  changed. 

i«<  Section  28,  subd.  3. 

i«8  BANK  OF  ENGLAND  v.  VAGLIANO  [1801]  App.  Gas.  107,  reversing  23 
Q.  B.  Div.  243.  22  Q.  B.  Div.  103;  CLUITUN  V.  ATTENBOKOUGU  [1897] 
App.  Gas.  90,  afl3rming  [1895]  2  Q.  B,  707. 

188  See  post,  §  09,  pp.  22G-2.34.     - 

187  See  post,  ff  94,  pp.  218-220. 

188  See  post,  §  95,  p.  221. 

189  See  post,  §  90.  pp.  222-220. 


64  OK    NEGOTIABLE    BILLS    AND    NOTES.  (Ch.   2 

33.  The  following  persons  may  transfer,  but  can  incur 
only  personal  liability; 

(a)  Executors. 

(b)  Administrators, 

(c)  Guardians. 

(d)  Trustees. 

The  generic  principles  governing  the  capacity  of  parties  to  con- 
tract are  not  changed  in  their  application  to  bills  and  notes.  A 
full  discussion  of  that  liability  belongs  more  properly  to  a  work  up- 
on the  general  subject  of  conti'acts  than  to  a  work  of  this  character. 
The  defenses  of  persons  non  compos  mentis,  Infancy,  coverture,  and 
of  transcending  corporate  powers,  and  their  effect  upon  the  position 
of  the  bona  fide  holder,  will  be  considered  to  a  limited  degree  later 
on.  We  speak  here  in  a  most  general  way  of  persons  acting  in  a 
representative  capacity  as  parties  to  negotiable  paper. 

Executors,  administrators,  guardians,  and  trustees  occupy  at 
least  one  general  property  relation  in  common:  an  estate  is  com- 
mitted to  them  to  apply.  An  executor  or  administrator  is  the 
hand  of  the  court  to  collect  property  and  pay  debts.  A  guardian 
or  trustee  has,  in  addition  to  these  functions,  to  hold  property,  and 
to  keep  it  intact  as  far  as  in  ordinary  human  prudence  it  can  be 
done.  They  hold  this  property,  as  the  law  phrases  it,  in  "autre 
droit,"  which  means  that  they  hold  for  others,  and  not  in  their  own 
right  They  are  allowed  by  law  to  charge  the  estates  left  in  their 
care  with  certain  disbursements,  which,  in  general,  are  those  neces- 
sary to  carry  into  force  and  effect  the  estates  which  they  are  to  ad- 
minister. But,  aside  from  these,  the  estate  cannot  be  bound.  It 
cannot,  for  example,  be  bound  by  an  executory  contract  If  the 
representative  makes  such  a  contract,  the  law,  in  order  that  the 
obligation  may  stand,  rather  than  fall,  holds  the  representative  per- 
sonally responsible,  not  the  estate  which  he  represents.  Thus,  in 
f]^Pi  onsp  of  the,,^p^J2l^j:y_C^JI^i  of  negotiable  paper,  the  law 
f\ppms  the  descriptive  charactej^-setting^iorth  the  representaTTve 
cl^ai'a^ter  in  which  the  party  has  signed  as  snrplnan^irp  ar,t^  fT.or."7S~rf 
as   his  personal   obligation.^^**    This   principle   is   extended   so   far 

iTo  See  Willis  v.  Sharp,  113  N.  Y.  586,  21  N.  E.  705.  The  main  cases  on 
this  point  are  AUSTIN  v.  MUNRO,  47  N.  Y.  360;  Ex  parte  Garland.  10  Ves. 


§  34)  AUTHORITY    OF    AGENT.  65 

that  an  executor  is  not  permitted  to  charge  the  estate,  although  he 
is  expressly  authorized  to  do  so  by  the  terms  of  the  will  under  which 
he  acts.^^^  This,  however,  does  not  preclude  the  power  of  transfer. 
If  a  bill  or  note  be  negotiablej^^t  maybe  indorsed,  but  the  executor, 
guardian,  or  trustee  indorsing  is  personally  liable  unless  he  exempts 
himself  by  an  indorsement  without  recourse.^^* 


AUTHORITY  OP  AGENT. 

34.  The  po-wer  of  persons  to  incur  liability  as  par- 
ties to,  and  to  transfer,  negotiable  instruments  by  the 
hands  of  others  is  governed  by  the  general  rules  appli- 
cable to  principals  and  agents. 

EXCEPTION — An  undisclosed  principal  cannot  sue  or 
be  sued  as  a  party  to  a  negotiable  instrument. 

Signature  hy  Agent — Liability. 

A  person  may  become  a  party  to,,_eiL-trancfop,  a  bill  op  ntrtg^y 
the  hand  of  an  agent.  Whether  one  whose  name  purports  to  have 
been  signed  by  another  as  drawer,  acceptor,  maker,  or  indorser  is 
liable  as  such  depends  upon  the  authority,  express  or  implied,  of 
the  person  who  wrote  the  signature.  If^sjich  authority  existed,  the 
principal,  and  he  alone,  is  bound.  No  particular  form  of  appointment 
is  necessary,  and  the  authority  of  the  agent  may  be  established  as  in 
other  cases  of  agency.^^'  For  example,  if  a  bill  or  note  be  drawn  or 
indorsed  "A  B  by  C  D,"  or  "A  B  by  G  D,  His  Attorney,"  it  appears 
clearly  that  A.  B.  is  principal,  provided  C.  D.  had  a  right  to  sign  A  B's 

119;  Fairland  v.  Percy,  L.  R.  3  Prob.  &  Dlr.  217;  Labouchere  r.  Ttipper,  11 
Moore,  P.  C.  198;  Downs  v.  Collins,  6  Hare,  418.  See,  also,  Thompson  t. 
Whitmarsh.  100  N.  Y.  3ri.  2  N.  E.  273. 

1"  Delaware,  L.  &  W.  R.  Co.  v.  Gilbert,  44  Hun,  201.  Modified  by  Willis 
▼.  Sharp,  113  N.  Y.  586,  21  N.  E.  705,  which  holds  that,  where  a  will  directs 
an  executor  to  carry  on  business,  the  funds  of  the  estate  In  the  business 
are  bound  in  equity  for  the  payment  of  debts.  It,  however,  admits  that  the 
executor  Ls  pereonally  liable  In  the  first  event. 

iT»  Rex  V.  Thom.  1  Term  R.  487;   CHILDS  v.  MONINS,  5  Moore,  282;   Harrl 
Bon  V.  McClelland,  57  Ga.  531;    Tryon  v.  Oxley,  3  G.  Greene,  280;    Davla  t. 
French,  20  Me.  21;   WISDOM  v.  BECKER,  52  111,  340. 
»T»  See  N(>>?.  Inst.  L.  §  38.    Of.  {§  38-40. 
NEG.B1LLS.-6 


♦66  OF    NEGOTIABLE    BILLS    AND    NOTES,  (Ch.   2 

name.  So,  also,  where  the  form  of  signature  is  "C  D  for  A  B,"  or 
"C  D,  Agent  for  A  B."  "*  If,  however,  G  D  had  not  authority,  no  per- 
son is  bound  on  the  instrument,  for  O  D,  in  the  cases  put,  did  not 
undertake  to  be  bound.  C  J)  would,  indeed,  be  liable,  but  only  upon 
an  implied  warranty  of  authority,  to  the  person  to  whom  h^  ddllveied 
the  instrument  or  the  assignee  of  the  tatter's  right  of  action,  for  the 
damages  resulting  from  the  breach.^ ^^  In  cases  of  simple  contract 
an  undisclosed  principal  may  take  advantage  of  the  act  of  an  agent 
who  has  made  a  contract  in  his  behalf,  and  may  sue  or  be  sued  there- 
on; but  this  doctrine  does  not  extend  to  instruments  under  seal,  or 
to  bills  and  notes.  Jio_personcan  be  party  to  an  action  upon  a  nego- 
tiable  instrument  unless  he  ajjpears  thereon  to  be  such.^^°  Therefore, 
iflhe  signature  \Se^  D,"  although  he  was  in  fact  agent  for  A  B,  evi- 
dence is  not  admissible  to  show  that  C  D  intended  to  bind  A  B.  And 
even  if,  under  the  same  circumstances,  the  signature  was  written  "C  D, 
Agent,"  the  name  of  the  principal  being  undisclosed,  the  word  "Agent" 
is  regarded  as  descriptio  personse,  and  C  D  is  bound  personally. ^^'^ 
There  are,  however,  conflicting  decisions.^'* 

1T4  Daniel,  Neg.  Inst.  §  298. 

iTB  BARTLETT  v.  TUCKER,  104  Mass.  336;  WHITE  v.  MADISON,  26  N. 
Y.  117;  Taylor  v.  Shelton,  30  Conn.  122.  It  seems  that  by  Neg.  Inst.  L.  §  38, 
the  holder  In  such  cases  may  sue  the  agent  on  the  instrument,  if  he  was  not 
authorized  to  sign  for  the  principal. 

176  SIFFKIN  V.  WALKER,  2  Camp.  308;  In  re  Adansonla  Co.,  L.  R.  9  Ch.  635; 
GRIST  V.  BACKHOUSE,  20  N.  C.  362;  Arnold  v.  Sprague,  34  Vt.  409;  Pease 
V.  Pease,  35  Conn.  131;  Texas  L.  &  T.  Co.  v.  Carroll,  03  Tex.  51;  Stackpole  v. 
Arnold,  11  Mass.  27;  Hyde  v.  Paige,  9  Barb.  150;  Nash  v.  Towne,  5  Wall.  689. 
See  Neg.  Inst.  L.  §  37. 

177  WILLIAMS  V.  ROBBINS,  16  Gray  (Mass.)  77;  ANDERTON  v.  SHOUP, 
17  Ohio  St.  125;  Anderson  v.  Pearce,  36  Ark.  293;  STINSON  v.  LEE,  68  Miss. 
113,  8  South.  272.     It  is,  however,  generally  held  that  a  corporation  may  be 


treated  as  a  party  to  a  bill  ornote^wTj^re,  lUijUjUd  ol  Ihecornnrate  nnme.  an- 
pears  the  name  and  title  of  Its  managing  officer,  as  "A  B,  Cashier,"  or  "A  B, 

17  8  Such  authorities  as  Mott  v.  Hicks,  1  Cow.  540,  GREEN  v.  SKEEL,  2  Hun, 
486,  and  Moore  v.  McClure,  8  Hun,  558,  in  New  York  lay  down  a  different 
doctrine.  It  appears  to  have  been  the  sense  of  the  court  in  Mott  v.  Hicks  that 
extrinsic  testimony  might  be  admitted  to  sliow  that  where  an  indorser  signed 
his  name  as  agent  It  was  competent  to  show  that  it  w^as  agreed  between  the 
parties  that  such  indorsement  was  merely  for  the  purpose  of  transfer,  and  that 
the  Indorser,  as  agent,  was  not  personally  liable.    This  is  also  the  doctrine 


§§  35-37)  DELIVERY    OF   INSTRUMENTS.  67 

DELIVERY  OF  INSTRUMENTS. 

35.  A  bill  or  note  is  inoperative  as  against  the  drawer 
or  maker  until  delivery. 

36.  Delivery  means  transfer  of  possession  vrith  intent 
to  transfer  title,  and  is  of  tvro  kinds: 

(a)  Actual  delivery,  which  is  effected  by  the   manual 

passing  of  the  instrument  itself  to  the  payee  or 
his  agent. 

(b)  Constructive  delivery,  which  is  effected  by  direc- 

tion to  a  third  person  in  actual  possession  of  the 
instrument  to  deliver  it  to,  or  to  hold  it  for,  the 
payee. 

37.  Delivery  in  escrow  means  delivery  to  a  third  per- 
son to  hold  until  a  certain  event  happens,  or  a  certain 
condition  is  fulfilled.      A  bill  or  note  delivered  in  escrow 

President";  the  such  designation  of  the  officer  with  his  title  being  deemed 
equivalent  to  the  designation  of  the  corporation.  Bank  of  Genesee  v.  Bank,  13 
N.  Y.  309;  First  Nat.  Bank  v.  Hall,  44  N.  Y.  395;  Chillicothe  Branch  of  State 
Bank  v.  Fox,  3  Blatchf.  431,  Fed.  Gas.  No.  2,6S3.  See  2  Ames,  Gas.  Bills  &  N. 
873.  Mr.  Daniel  states  this  as  an  exception  confined  to  bank  cashiers.  Dan- 
iel, Neg.  Inst.  §  417.  See,  also,  Gasco  Nat.  Bank  v.  Glark,  139  N.  Y.  307,  34  N. 
E.  908;  Souhegan  Nat.  Bank  v.  Boardman,  46  Minn.  293,  48  N.  W.  1116.  Neg. 
Inst.  L.  §  72,  provides  that,  "-pyhere  an  instrument  is  drawn  or  indorsed  to  a 
person  as  'cashier'  or  other  fiscal  officer  of  a  bank  or  coi"poration,  it  Is  deemed 
prima  facie  to  be  payable  to  the  bank  or  corporation,"  etc.  Where  the  names 
of  the  agent  and  principal  both  appear  on  the  instrument,  it  is  a  question  of 
construction  which  is  the  real  party.  Thus,  where  the  name  of  the  principal 
appears  in  the  heading,  and  the  paper  Is  signed  by  one  purporting  to  be  agent. 
It  has  been  held  that  the  principal  is  liable.  CHIPMAN  v.  FOSTER,  119  Mass. 
189;   HITCUCOCK  v.  BUCHANAN,  105  U.  S.  416. 

in  GREEN  v.  SKEEL,  where  It  is  held  that  a  person  signing  his  name  as 
agent  in  the  business  of  his  agency  is  not  personally  liable.  See,  also,  May  v. 
Hewitt.  33  Ala.  161.  On  the  other  hand,  in  DB  WITT  v.  WALTON, 
9  N.  Y.  571,  the  addition  of  the  word  "agent"  is  treated  as  mere  descriptio 
pcrson.ne,  and  this  is  emphasized  and  affirmed  In  Pumpclly  v.  Plielps.  40  N.  Y, 
59.  and  In  a  dictum  In  Briggs  v.  Partridge,  04  N.  Y.  359,  363,  this  is  further 
approved. 


68  OF    NEGOTIABLE    BILLS    AND    NOTES.  (Ch.  2 

becomes  absolute  in  the  hands  of  a  bona  fide  purchaser 
for  value,  whether  or  not  the  event  happens  or  the  con- 
dition is  fulfilled. 

The  inception  of  a  note  is  defined  by  Judge  Piatt  to  mean  "when 
it  was  first  given,  or  when  it  first  became  the  evidence  of  an  exist- 
ing contract."  ^^'  It  has  no  legal  inception  until  it  is  delivered  as 
evidence  of  a  subsisting  debt.^^"  The  mere  writing  and  signing  of 
a  bill  or  note,  which  the  drawer  or  maker  retains  in  his  hands,  forma 
no  contract.^*^  Ko  person  has  then  a  right  of  action  upon  it  any 
more  than  if  it  were  blank  paper.^^^  The  inception  of  the  paper 
is  when  there  came  into  existence  a  right  of  action  upon  it^^'  This 
is  because  while  the  note  or  bill  is  in  the  maker's  hands,  it  can  be 
erased,  canceled,  or  revoked.  It  cannot,  therefore,  be  an  evidence 
of  indebtedness  until  it  is  beyond  such  possibility.  The  decisive  step 
for  this  is  the  delivery.^** 

Two  things  must  concur  in  a  delivery.  The  first  is  the  transfer, 
actual  or  constructive,  of  the  possession  of  the  instrument;  the  sec- 
ond an  intent  to  transfer  thp_-titi(»-^ffl-the  parf-<»l- t)i»  transferrer. 
The  minds  of  both  parties,  to  this  extent,  must  concur.    This  is  the 

179  Marvin  v.  McCullum,  20  Johns.  288. 

180  Delivery  Is  essential  to  the  validity  of  a  bill  or  note.  MEEKER  v. 
SHANKS.  112  Ind.  207.  13  N.  E.  712,  Johns.  Cos.  Bills  &  N.  31.  "As  a  gen- 
eral rule,  a  promissory  note,  like  any  other  written  contract,  has  no  legal  in- 
ception or  valid  existence,  as  such,  until  It  has  been  delivered  in  accordance 
with  the  purpose  and  intent  of  the  parties."  BUKSON  v.  HUNTINGTON,  21 
Mich.  416;  upon  point,  see,  also,  CHIPMAN  v.  TUCKER,  38  Wis.  43;  HILLS- 
DALE COLLEGE  V.  THOMAS.  40  Wis.  6G1;   CLINB  v.  GUTHRIE,  42  Ind.  227. 

181  GALE  V.  MILLER,  54  N.  Y.  536;  Bayley  v.  Taber,  5  Mass.  286;  Free- 
man V.  Ellison,  37  Mich.  459;  WOODFORD  v.  DORWIN,  3  Vt.  82;  Ward  v. 
Churn,  18  Grat  (Va.)  801;  MICHIGAN  INS.  CO.  v.  LEAVENWORTH,  30 
Vt  11. 

182  It  Is  held,  however.  In  some  jurisdictions,  that  though  paper  was  never 
delivered,  but  was  wrongfully  taken  from  the  possession  of  the  maker,  he  is 
estopped,  as  against  a  bona  fide  purchaser  for  value,  from  denying  its  execu- 
tion.    Post,  p.  207. 

18  8  Eastman  v.  Shaw,  65  N.  Y.  527,  528. 

184  Catlin  V.  Gunter,  11  N.  Y.  368;  COWING  v.  ALTMAN.  71  N.  Y.  435,  79 
N.  Y.  167;  Klnzie  v.  Farmers'  &  Mechanics'  Bank,  2  Doug.  (Mich.)  105;  VIN- 
TON v.  PECK,  14  Mich.  287.     See  Neg.  Inst  L.  §  35.     C?f.  section  6. 


§§  35-37)  DELIVERY    OF    INSTRUMENTS.  69 

law  laid  down  ^®''  in  a  case  where  the  question  was  whether  a  check 
for  $10,000  in  gold  left  upon  a  clerk's  desk,  unknown  to  him,  and 
without  his  consciously  accepting  it,  was  a  delivery  of  it,  and  the 
court  said  it  was  not.  And  in  a  case  where  ^®®  it  was  the  intention 
to  deliver  the  instrument  left  in  escrow  on  the  1st  of  May,  but  on 
April  30th  the  transferrer  died,  it  was  held  that  there  could  have 
been  no  actual  delivery  nor  intention  to  deliver  the  instrument.  The 
necessary  elements  to  a  delivery  were  wanting.  So  where  the  payee 
of  a  bill  indorsed  it,  but  died  before  delivering  it,  it  was  held  that 
his  executor,  finding  it  among  his  papers,  could  not  consummate  the 
transfer  by  delivering  it.^'^  On  the  other  hand,  such  acts  as  hand- 
ing completed  notes  to  the  payee,  who,  though  objecting  to  the  form, 
retained  them;  '**  or  depositing  completed  notes,  properly  ad- 
dressed, in  the  post  office;  ^^"  or  giving  a  duplicate  bill  in  place  of 
one  lost,  which  the  payee  treated  as  an  original, — have  been  held 
to  constitute  sufficient  deliveries.  It  is  to  be  noted,  however,  that 
the  delivery  need  not  be  to  the  payee,  nor  need  the  intent  of  the 
transferrer  to  transfer  title  be  communicated  to  him.  For,  as  will 
be  seen,  a  bill  or  note  may  be  delivered  in  escrow,  and  take  effect! 
on  performance  of  the  condition,  without  knowledge  or  actual  as- 
sent of  the  payee;  ^•*  and  a  note  delivered  in  a  sealed  envelope,  to 
be  opened  after  the  maker's  death,  is  operative,  although  the  payee 
does  not  become  aware  of  the  existence  of  the  note  until  after  the 

185  Kiiine  v.  Ford,  52  Barb,  196,  affirmed  43  N.  Y.  587. 

186  Artcher  v.  Whalen,  1  Wend.  179. 

18T  BKOMAGE  V.  LLOYD,  1  Exch.  32.  This  action  was  In  assumpsit  on  a 
note  In  writing,  made  by  defendants,  indorsed  In  blank  by  the  payee,  and,  after 
the  death  of  the  latter,  delivered  to  the  plaintiffs  by  the  payee's  executrix, 
without  her  Indorsement.  It  was  held  that  those  to  whom  the  note  was  so 
delivered  had  no  right  to  sue  upon  It,  for  a  "transfer"  was  not  effected  thereby. 
In  the  case  of  a  note  signed  In  Florence,  and  mailed  to  the  malcer's  brother  In 
London,  who  there  deUvered  It  to  the  payee,  it  was  contended  that  the  cause 
of  action  arose  In  the  former  place,  but  It  was  held  that  no  contract  arose  until 
Its  delivery,  and  that  consequently  the  cause  of  action  arose  within  the  juris- 
diction of  such  place  of  delivery.     CHAPMAN  v.  COITKELL,  13  Wkly.  liep. 

188  Bodley  v.  Higgins,  73  111.  375. 

is»  U]-:X  V.  LAxMBTO.N.  5  I'rice,  428;  Kirkman  v.  Bank  of  America,  2  Cold. 
(Tenn.)  397. 

i»o  WOIITU  V.  CASE,  42  N.  Y.  3(i2;   2  Ames.  Cas.  BlUs  &  N.  878. 


70  OF    NEGOTIABLE    BILLS    AND    NOTES.  (Cll.  2 

death  occurs.^'*  The  outward  and  visible  indication  of  delivery  is 
possession,  because,  in  nine  cases  out  of  ten,  where  a  man  holds 
paper,  he  has  a  right  to  hold  it.  And  the  courts  have,  as  we  shall 
see,  confirmed  this  business  view  accordingly,  declaring  that,  when 
a  bill  or  note  is  found  in  the  hands  of  a  payee,  it  will  be  presumed 
that  it  was  legally  delivered  to  him,  and  was  in  fact  his.^®'  But  this 
presumption  may  be  rebutted.^^^ 

Delivery  may  also  be  upon  conditions.*®*  Deliveries  upon  condi- 
fi£mg  nrp  nf  tjvQ  classes:  delivery  as  an__escrow,  nnil  rlpUvcry  tn  tljf^ 
other  party  to  the  instrument  upon  a  condition.  Delivery  as  an 
escrow  is  defined  *°'*  as  a  delivery  to  a  third  peFson,  made  to  await 
the  happening  of  an  event,  or  performance  of  a  condition,  or  some 
aflSrmative  action  on  the  part  of  the  other  party,  before  he  is  enti- 
tled to  the  absolute  delivery  of  the  instrument,  as  distinguished 
from  the  aflirmative  action  of  the  party  who  delivers  the  instru- 
ment in  escrow.  The  authorities  agree  that  a  delivery  in  escrow 
has  two  elements:  It  must  be  to  some  person  not  ultimately  en- 
titled to  receive  it;  and  the  delivery  must  take  effect  and  the  title 
to  the  instrument  pass  the  instant  the  condition  of  the  escrow  is 
fulfilled,  even  though  the  depositary  has  not  formally  delivered  it 
to  the  person  entitled  to  the  possession.*®'  In  these  respects  it  is 
like  the  escrow  of  a  deed,  from  the  analogy  of  which  it  is  in  fact 
drawn.     There  are,  however,  these  distinctions:    A  deed  once  de- 

181  WORTH  V.  CASE,  supra;   DEAN  v.  CARRUTH.  108  Mass.  242. 

192  Griswold  v.  Davis,  31  Vt.  390;  RUSSELL  v.  WHIPPLE,  2  Cow.  (N.  Y.) 
536;  Peets  v.  Bratt,  6  Barb.  (N.  Y.)  662;  Chappell  v.  Bissell,  10  How.  Prac. 
(N.  Y.)  274;  Marshall  v.  Rockwood,  12  How.  Prac.  (N.  Y.)  452;  Keteltas  v. 
Myers,  19  N.  Y.  231;   Cordier  v.  Thompson,  8  Daly  (N.  Y.)  172. 

188  Scaife  v.  Byrd,  39  Ark.  5G8;  Chandler  v.  Temple,  4  Cush.  (Mass.)  285; 
Rhine  v.  Robinson,  27  Pa.  St.  30;   Roberts  v.  Jackson,  1  Wend.  (N.  Y.)  478. 

19*  BELL  V.  INGESTRE,  12  Adol.  &  E.  (N.  S.)  319.  In  this  case  one  Ed- 
wards, having  drawn  bills  and  procured  acceptance  by  defendant  indorsed  the 
bills,  and  sent  them  to  the  plaintiff,  with  which  he  was  to  take  up  overdue  bills. 
It  was  stipulated  as  an  express  condition  that  such  overdue  bills  should  be 
returned  to  him.  It  was  held  that  the  indorsement  was  incomplete  until  the 
condition  precedent  had  been  fulfilled  by  the  return  of  the  overdue  bills.  BEN- 
TON V.  MARTIN,  52  N.  Y.  574. 

193  WORTH  v.  CASE,  42  N.  Y.  367. 

196  Edw.  Bills  &  N,  8  243;  Daniel,  Neg.  Inst.  68,  and  cases  cited;  Earl  v. 
Peck,  64  N.  Y.  596. 


§§  35-37)  DELIVERY    OF   INSTRUMENTS.  71 

livered  to  be  held  in  escrow  by  a  third  party,  and  wrongly  passed 
on  by  him,  is  subject  to  defenses,  even  in  the  hands  of  a  purchaser 
for  value  without  notice,  but  a  negotiable  instrument  is  not^*^  A 
deed  being  delivered  conditionally  to  the  obligee,  parol  evidence  that 
it  was  conditional  is  admissible.^^' 

A  delivery  upon  a  condition  is  where  the  instrument  is  delivered 
to  the  payee,  to  be  held  by  him  pending  some  future  event.  It  is 
explained  in  Juilliard  v.  Chaffee.^ ^®  There  Judge  Danforth  collates 
the  authorities,  and  deduces  the  rule  that  a  party  sued  by  his  prom- 
isee may  always  show  that  the  instrument  was  delivered  to  the  payee 
to  take  effect  only  on  the  happening  of  some  future  event,  or  that 
its  design  and  object  were  different  from  the  effect  of  its  language 
if  taken  alone.^°°  In  that  case,  as  the  note  did  not  indicate  all  the 
agreement,  it  was  held  the  full  purpose  of  its  execution  might  be 
shown.  So  in  BENTON  v.  MARTIN,='»i  the  law  was  laid  down  that 
conditions  might  be  affixed  to  the  delivery  of  a  note  in  the  hands 
of  a  payee,  which,  as  between  the  immediate  parties,  would  be 
binding,  and  a  defense.  This  does  not  apply  to  the  bona  fide 
holder.^"'  But  the  authorities  are  not  unanimous,  many  cases  hold- 
ing that  the  delivery  cannot  be  upon  condition,  or  in  escrow,  to  the 
payee  himself.^"' 

197  Daniel,  Neg.  Inst.  §  68;  VALLETT  v.  PARKER,  6  Wend.  (N.  T.)  615; 
FEARING  V.  CLARK,  16  Gray  (Mass.)  74;  Gamer  v.  Fite,  93  Ala.  405,  9 
South.  367;  GRAFF  v.  LOGUE,  61  Iowa,  704,  17  N.  W.  171.  CHIPMAN  v. 
TUCKER,  38  Wis.  43,  contra. 

198  Couch  V.  Meeker,  2  Conn.  302;   Prutsman  v.  Balcer,  30  Wis.  644. 
19  9  92  N.  Y.  529. 

200  Seymour  v.  Cowing,  *40  N.  Y.  532;  Eastman  v.  Shaw,  65  N.  Y.  522; 
Blossom  V.  Griffin,  13  N.  Y.  569;  Hutchins  v.  Hebbard,  34  N.  Y.  24;  Baiker 
T.  Bradley,  42  N.  Y.  316;  Grierson  v.  Mason,  60  N.  Y.  394;  Chapin  v.  Dobson, 
78  N.  Y.  75;  Crosman  v.  Feller,  17  Pick.  171;  Watkins  v.  Bowers,  119  Mass. 
383;  Brown  v.  St.  Charles,  66  Mich.  71,  32  N.  W.  926;  Burke  v.  Dulaney.  153 
U.  S.  228,  14  Sup.  Ct.  816. 

»oi  52  N.  Y.  570. 

202  See  §  93   et  seq.,  post.     Note,  also,  Bookstaver  v.  Jayne,  60  N.  Y.  146. 

208  STEWART  V.  ANDERSON,  59  Ind.  375;  Clanin  v.  Machine  Co..  118  Ind. 
372,  21  N.  E.  35J  JCNES  v.  .SHAW,  67  Mo.  667:  Carter  v.  Moulton,  51  Kan.  0, 
32  Pac.  633.    See  4  Am.  &  Eng.  Enc  Law  (2d  Ed.)  205. 


72  OK    ^EGOTIABLE   BILLS    AviD   N0TK3.  (Ch.   2 


DATE. 

38.  A  date  in  a  bill  or  note  is  not  necessary  to  its  va- 
lidity. 

The  date  of  an  instrument  is  not  so  necessary  to  it  in  law,  that 
its  absence  avoids  the  instrument.  It  is  not  an  essential  charac- 
teristic of  the  instrument,  as  other  qualities  are  characteristic  of  the 
instrument  or  of  its  negotiability.^"*  For  this  reason  the  date  may 
be  supplied  by  parol,*""  the  date  of  delivery  being  the  day  of  date; 
or  it  may  be  antedated  or  postdated,^"*  or,  if  the  date  be  left  blank, 
all  parties  are  deemed  to  consent  that  the  holder  may  fill  up  the 
blank  with  a  date.*"'  Legally  speaking,  the  chief  importance  of 
a  date  is  that  it  is  presumptive  evidence  of  the  time  of  its  actual 
execution,  a  presumption,  however,  which  may  be  contradicted  by 
parol  evidence.^"*  Likewise  the  place  of  date  is  supposed  to  be 
contemplated  by  the  parties  as  the  place  of  payment,*""  because,  in 
the  absence  of  all  other  guides  to  any  information  on  this  point,  the 
courts  turn  to  the  instrument  itself,  and  say  the  place  of  date  is 
probably  the  place  of  residence  of  the  parties,  and  it  is  reasonable 
to  suppose  that  the  parties  contemplated  the  place  of  their  resi- 

«04  See  Neg.  Inst,  L.  §  25,  subd.  1. 

208  COWING  V.  ALTMAN,  71  N.  Y.  441;  Davis  v.  Jones,  25  Law  J.  C.  P.  91. 

209  PASMORE  V.  NORTH,  13  East,  517;  Frazier  v.  Trow's  Printing  &  Book- 
binding Co.,  24  Hun,  281;  Gray  v.  Wood,  2  Har.  &  J.  328;  McSHARRAN  v. 
NEELEY,  91  Pa.  St.  17;  ALMICH  v.  DOWNEY,  45  Minn.  460,  48  N.  W.  197. 
See  Neg.  Inst.  L.  §  31.     Cf.  §  36,  subd.  3. 

207  Knisely  v.  Sampson,  100  111.  574;  MITCHELL  v.  CULVER,  7  Cow.  (N. 
Y.)  330.     See  Neg.  Inst.  L.  §  32.     As  to  filling  blanks,  post,  p.  258. 

«0  8  Germania  Bank  v.  DIstler,  4  Hun,  633,  affirmed  in  64  N.  Y.  642;  DRAKE 
V.  ROGERS,  32  Me.  524;  BREWSTER  v.  McCARDELL,  8  W^end.  479.  See 
Neg.  Inst  L.  §  30. 

209  The  dating  of  a  promissory  note  is  prima  facie  evidence  of  the  place  of 
payment,  as  It  is  presumptive  evidence  that  the  maimer  resides  at  the  place  of 
date.  Where  the  maker  is  known  to  have  a  residence  which  is  not  changed 
when  the  note  is  payable,  a  regular  demand  must  be  made,  regardless  of  the 
place  of  date.  TAYLOR  v.  SNYDER,  3  Denio,  145;  see,  also,  BANK  OF  OR- 
LEANS V.  WHITTEMORE,  12  Gray,  4()9.  As  to  the  presumption  raised  by 
the  date  as  to  the  maker's  residence,  see  Smith  v.  Philbrick,  10  Gray,  252;  De- 
moud  V.  Burnham,  133  Mass.  339. 


§  39)  VALUE    RECEIVED.  73 

dence  as  the  place  where  the  instrument  was  to  be  paid.  It  becomes 
important  sometimes  in  determining  whether  the  instrument  is  a 
foreign  or  inland  bill  or  note,*^°  and  where  presentment  and  demand 
are  to  be  made,  or  where  notices  of  dishonor  are  to  be  sent,  and 
questions  of  that  character.*^*  These  remarks  are  to  be  understood 
with  some  limitations.  The  date  of  a  completed  instrument  cannot 
be  changed  unless  by  mutual  consent  without  avoiding  it.'^*  Nei- 
ther must  it  be  understood  that  dating  a  note  at  a  particular  place 
makes  that  place  the  one  at  which  payment  should  be  demanded. 
It  does  not.*"  It  merely  is  a  presumption  to  guide  the  court.  And, 
lastly,  in  practical  affairs  an  instrument  without  date  will  not  circu- 
late, because  neither  banks  nor  merchants  will  discount  it.  The 
date,  in  most  instances,  determines  when  the  instrument  is  to  be 
paid.  And  unless  it  has  a  date,  or  one  is  agreed  upon  and  inserted, 
it  is  impracticable  as  a  circulating  medium. 

VALUE  RECEIVED. 

39.  Value  received  is  not  necessary  to  be  expressed  in  a 
negotiable  instrument. 

The  expression  "value  received"  is  an  acknowledgment  of  the 
receipt  of  a  consideration  sufficient  prima  facie  to  support  the  con- 
tract, and  make  it  a  binding  promise  for  the  payment  of  money. 
It  raises  the  various  questions  relating  to  consideration,  which,  so 
far  as  they  pertain  to  the  circulation  of  the  instrument,  are  com- 
mented upon  hereafter.'^*     In  itself,  with  bills  it  means  that  a  con- 

210  Ante,  p.  24. 

Ill  STEWART  V.  EDEN,  2  Calnes,  121 

ti2  See  §  105,  post  where  a  note  Is  Intended  to  bear  date  as  of  !ts  execution, 
but  Is  wrongly  dated  by  mistake,  the  mistake  may  be  corrected,  except  as  to  an 
Innocent  purchaser  who  would  be  prejudiced.  ALMICH  v.  DOWNEY,  45  Minn. 
460,  48  N.  W.  197. 

218  ANDERSON  v.  DRAKE,  14  Johns.  114.  It  Is  held  In  this  case  that 
where  a  note  Is  not  made  payable  at  a  particular  place,  and  the  owner  has  a 
known  and  permanent  residence  within  the  state,  the  holder  is  bound  to  make 
a  demand  at  such  residence  in  order  to  charge  the  Indorser.  Whoever  takes 
such  note  Is  presumed  to  have  made  inquiry  for  the  residence  of  the  maker  in 
order  to  know  where  to  demand  payment. 

21*  See  post,  S  111  et  seq. 


74  OF    NEGOTIABLE    BILLS    AND    NOTES.  (Ch.   2 

sideration  has  been  received  by  the  drawer  of  the  payee,  or  by  the 
acceptor  of  the  drawer,  according  as  the  bill  has  or  has  not  been 
accei)ted.^^''  With  notes  it  implies  a  consideration  received  by  the 
niaker.'^'  Indorsers,  from  the  mere  fact  of  their  indorsement,  are 
d(^t'iiu'd  to  have  received  a  consideration,  each  indorser  from  his 
immediate  indorsee.^^^  And  thus  the  instrument  in  its  circulation 
bears  upon  itself  prima  facie  proof  of  a  consideration  received  by 
any  of  the  parties  against  whom  it  is  sought  to  be  enforced.  The 
student  must,  however,  note  that,  although  these  words  are  well- 
nigh  universal  in  negotiable  bills  and  notes,  they  are  in  no  wise 
necessary  to  them.^^^  Their  omission  is  unimportant,  because  the 
negotiable  instrument  itself  imports  a  consideration.  A  mere  pro- 
duction of  the  instrument  on  a  trial  is  prima  facie  proof  of  the 
fact  that  it  was  given  for  a  sufficient  consideration.^^®  The  courts 
of  New  York  in  a  late  decision  ^^°  have  declared  that  this  rule  ap- 
plies to  certain  classes  of  non-negotiable  promissory  notes,  or  at 
least  to  that  class  which  import  an  absolute  promise  to  pay  money, 
but  without  words  of  negotiability.     It  is  hard  to  say  what  effect 

21 B  GRANT  V.  DA  COSTA,  3  Maule  &  S.  351;  BENJAMIN  v.  TILLMAN,  2 
McLean,  213,  Fed.  Cas.  No.  1,304;  Highmore  v.  Primrose,  5  Maule  &  S.  65; 
Thunuan  v.  Van  Brunt,  19  Barb,  409. 

216  Clayton  v.  Gosling,  5  Barn.  &  C.  361,  8  Dowl.  &  R.  110. 

21 T  Edw.  Neg.  Inst.  §  439;   Chit.  Bills,  69;  Story,  Prom.  Notes,  7,  81. 

218  Underbill  v.  Phillips,  10  Hun,  591;  Arnold  v.  Sprague,  34  Vt.  402;  Peo- 
ple V.  McDermott,  8  Cal.  288;  JENNISON  v.  STAFFORD,  1  Cush.  (Mass.)  168; 
DEAN  V.  CARRUTH,  108  Mass.  242.  This  case  holds  that  in  an  action  on  a 
promissory  note  the  plaintiff  sustains  the  burden  of  proof  by  producing  the  note 
and  proving  its  execution.  It  is  evidence  under  the  hand  of  the  promisor  of  a 
contract  made  upon  a  good  consideration,  even  if  the  words  "value  received" 
are  omitted.  TOWNSEND  v.  DERBY,  3  Mete.  (Mass.)  363;  HATCH  v. 
TRAYES,  11  Adol.  &  E.  702;  FRANKLIN  v.  MARCH.  6  N.  H.  364.  See  Neg. 
Inst.  L.  §  25,  subd.  2. 

21 »  Underbill  v.  Phillips,  10  Hun  (N.  Y.)  591;  KIMBALL  v.  HUNTINGTON, 
10  Wend.  (N.  Y.)  675;   TOWNSEND  v.  DERBY,  3  Mete.  (Mass.)  363. 

220  CARNWRIGHT  v.  GRAY,  27  N.  E.  s;j.").  127  N.  Y.  92.  Post,  pp.  205-274. 
See,  also,  CARVER  v.  HAYES,  47  Me.  257;  FRANKLIN  v.  MARCH.  6  N.  H. 
364.  Here  the  action  was  upon  this  instrument:  "Good  to  R.  C.  or  order  for 
$30,  borrowed  money."  And  it  was  held  that  in  this  case  the  note  "shows  that 
rt  is  founded  upon  a  sufficient  consideration,  it  purporting  on  its  face  to  have 
been  given  for  money  borrowed;  and  "good  to  R.  C.  or  order'  is  equivalent  to 
a  promise  to  pay  R.  C.  or  order." 


§  40)  DAYS    OF   GRACE.  75 

this  decision  will  have  upon  the  rule  that  in  case  of  a  non-negotiable 
instrument,  unless  a  consideration  appeared  upon  the  face  of  the 
instrument,  and  prima  facie  evidence  was  thus  created  by  an  admis- 
sion upon  the  instrument  itself,  a  consideration  must  be  proved.^" 
But  it  will  perhaps  be  the  case  that,  except  in  absolute  promises  for 
the  payment  of  money,  the  latter  rule  will  still  prevail. 


DAYS  OF  GRACE. 

40.  Days  of  grace  are  days  added  to  the  nominal  time 
of  payment  of  all  bills  or  notes  except  those  impliedly 
or  expressly  payable  on  demand,  and  are  computed  by 
excluding  the  day  of  date  and  including  the  day  of  pay- 
ment. 

Originally,  days  of  grace  were  days  allowed  the  drawee  or  ac- 
ceptor of  a  foreign  bill  by  the  holder  to  enable  him  to  provide  funds 
to  meet  the  bill.  They  were  days  obtained  by  the  drawee  or  ac- 
ceptor through  the  grace  of  the  holder.  This  was  first  custom,  then 
law.  These  days  are  now  extended  to  cases  of  negotiable  inland 
bills  and  promissory  notes  as  well  as  the  foreign  bills  to  which  at 
first  the  custom  was  only  appended.  It  extends  under  the  common- 
law  rules  to  all  negotiable  bills  of  exchange  or  notes,^^^  except  those 
wherein  the  instrument  is  made  payable  on  demand, ^^'  or  without 
specification  of  time,  in  which  case  on  demand  without  grace  is  un- 
derstood, or  wherein  grace  is  expressly  waived.     These  common-law 

«2i  AVERETT  V.  BOOKER,  15  Grat.  (Va.)  1G9;  Atkinson  v.  :Manks,  1  Cow. 
(N.  Y.)  691;  BILDERBACK  v.  BURLINGAME,  27  111.  338;  JOSSELYN  v.  LA- 
CIER. 10  Mod.  294,  317. 

222  In  the  case  of  ORIDGE  v.  SHERBORNE,  which  was  an  action  on  a 
promissory  note  payable  In  installments,  it  was  held  that  the  maker  was  enti- 
tled to  the  usual  days  of  grace  as  each  installment  fell  due.  11  Mees.  &  W.  374. 
And  see  PERKINS  v.  FRANKLIN  BANK.  21  Pick.  (Mass.)  483;  Mechanics' 
Bank  v.  Merchants'  Bank,  6  Mete.  (Mass.)  13;  Wood  v.  Corl,  4  Mete.  (Mass.) 
20.3.  As  to  notes  payable  In  installments,  see  Coffin  v.  Loring,  5  Alien  (Mas.s.) 
l.''j.3.  Checks  are  not  entitled  to  days  of  grace.  ANDREW  v.  BLACllLY,  11 
Ohio  St.  89.  Johns.  Cas.  Bills  &  N.  50. 

228  HART  V.  SMITH,  15  Ala.  807;  TRASK  v.  MARTIN,  1  E.  D.  Smith  (N. 
Y.)  r>urj;   Summerviiie  v.  Williams,  1  Slew.  (Ala.)  481.     I'ost,  p.  344. 


76  OF    NEGOTIABLE    BILLS    AND   NOTES.  (Ch.  2 

provisions  are  very  generally  modified  by  the  statutes  of  various 
states.  In  some  states,  too,  promissory  notes  are  not  entitled  to 
grace.  The  doctrine  is  that  they,  not  being  negotiable  in  them- 
selves, but  being  made  so  by  statute,  are  not  placed  upon  the  footing 
of  bills  of  exchange,  unless  the  statute  expressly  gives  them  all  the 
privileges  of  negotiability.  But  where  the  statute  does  place  notes 
on  the  footing  of  bills  of  exchange,  then  grace  follows  as  a  matter 
of  course.  For  the  same  reason  non-negotiable  instruments,  unless 
by  statute  placed  on  the  footing  of  negotiable  Instruments,  are  not 
entitled  to  grace.*'* 

The  number  of  days  allowed  as  grace  is  generally  three,"'  and 
is  computed  by  adding  them  to  the  days,  or  months  reckoned  as 
calendar  months,  stipulated  in  the  instrument.'"  The  day  of  date 
is  excluded  from  the  calculation  and  the  day  of  payment  included."' 
This  computation  by  months  does  not  take  into  account  the  varying 
length  of  the  month.  The  time  reckoned  in  months  may  be  longer 
or  shorter,  according  as  there  are  more  or  less  days  in  the  month. 
It  also  does  not  take  into  account  the  fact  that  the  last  day  of 
grace  happens  upon  a  non-business  day.  In  this  last  event,  though 
in  case  of  all  non-commercial  instruments  the  time  which  must  ex- 
pire before  suit  can  be  brought  against  the  debtor  is  extended  to 

«*«  Under  the  statute  of  3  &  4  Anne,  notes  payable  to  a  particular  person, 
without  "order,"  have  been  held  entitled  to  grace.  SMITH  v.  KENDALL,  6 
Term  R.  123;  Duncan  v.  Institution,  10  Gill  &  J.  (Md.)  299;  Cox  v.  Reinhardt,  11 
Tex.  591;  Dubuys  v.  Farmer,  22  La.  Ann,  478.  Luce  v.  Shoff,  70  Ind.  152, 
contra.     See  Rand.  Com.  Paper,  9  1057. 

«2B  Daniel,  Neg.  Inst.  §  622,  Demand  of  payment  on  negotiable  bills  and 
notes  cannot  be  legally  made  until  the  third  day  of  gi-ace,  GRIFFIN  v.  GOFF, 
12  Johns.  (N.  Y.)  423,  Johns.  Cas.  Bills  &  N.  49.  In  the  case  of  Lenox  v.  Rob- 
erts It  was  held  that  demand  should  be  made  on  the  third  day,  and  notice  of 
the  maimer's  default  be  posted  in  time  to  go  by  the  mail  of  the  day  after.  Len- 
ox V.  Roberts,  2  Wheat,  373;  Bank  of  Alexandria  v.  Swann,  9  Pet.  33. 

229  Thomas  v.  Shoemaker,  6  Watts  &  S,  179;  McMurchy  t.  Robinson,  10 
Ohio,  496. 

22T  ROEHNER  V.  INSURANCE  CO.,  63  N,  Y.  160;  Bellasis  v.  Hester,  1  Ld, 
Raym.  280;  Campbell  v,  French,  6  Term  R.  212;  Hartford  Bank  v,  Barry,  17 
Mass,  24;  RIPLEY  v.  GREENLEAF,  2  Vt.  129;  AVERY  v.  STEWART,  2 
Conn.  69.  Johns.  Cas.  Bills  &  N.  57;  Henry  v,  Jones,  8  Mass,  453;  Pearson  v. 
Stoddard,  9  Gray  (Mass.)  199;   Went  worth  v.  Clap,  11  Mass.  87. 


§  40)  DAYS    OF    GRACE.  77 

the  next  succeeding  business  day,'*"  yet  with  negotiable  instruments, 
under  the  common  law,  grace  is  not  extended  in  this  way.  With 
them  the  days  of  grace  end  on  the  next  preceding  business  day,  be- 
causa  the  debtor  cannot  compel  the  creditor  to  extend  the  indul- 
gence which  a  custom  of  doubtful  advantage  has  already  attached 
to  the  paper. '^^^  This  rule  has  been  wisely  modified  by  the  statutes 
of  many  jurisdictions,  where  the  day  of  payment  has  been  declared 
to  be  the  next  succeeding  secular  or  business  day.****  But,  in  the 
absence  of  any  express  statute,  it  is  generally  understood  that  the 
commOxi-Iaw  rule  would  prevail.  It  is  to  be  observed  that  by  the 
Negotii^bie  Instruments  Law,  as  it  has  been  enacted  in  most  states, 
days  01  grace  have  been  abolished.'*'* 

«*8  SALTER  V.  BURT.  20  Wend.  205.  In  this  case  a  postdated  check  was 
payable  on  the  day  of  Its  date,  without  days  of  grace.  As  it  fell  due  on  Sun- 
day, the  question  arose  as  to  whether  payment  should  be  made  on  the  previous 
Saturday  or  the  Monday  following.  The  following  Is  a  portion  of  the  court's 
opinion:  "When  there  are  no  days  of  grace,  and  the  time  for  payment  or  per- 
formance specified  •  •  •  falls  on  Sunday,  the  debtor  may,  I  thinlj,  dis- 
charge his  obligation  on  the  following  Monday."  A  bill  or  note  falling  due  on 
Sunday,  without  days  of  grace,  Is  payable  on  the  following  day.  HIRSH- 
FIELD  v.  BANK,  83  Tex.  452,  18  S.  W.  743;  Id.,  Johns.  Cas.  Bills  &  N.  53; 
BARRETT  v.  ALLEN,  10  Ohio,  426;   AVERY  r.  STEWART,  2  Conn.  69. 

«20  BUSSARD  V.  LEVERING,  6  Wheat.  121;  Reed  v.  Wilson,  41  N.  J.  Law, 
29;  KUNTZ  v.  TEMPLE,  48  Mo.  78;  Farnum  v.  Fowle,  12  Mass.  89;  Barker 
T.  Parker,  6  Pick.  (Mass.)  80,   City  Bank  v.  Cutter,  3  Pick.  (Mass.)  414. 

a»o  Rev.  St  N.  Y.  pp.  2506,  2507. 

•ai  Section  145.     Of.  §§  5,  146. 


78  ^,  ACCEPTANCE    OF    BILLS    OF    EXCHANGB.  (Ch.  S 

CHAPTER  m. 
ACCErTANCE  OP  BILLS  OF  EXCHANGB. 

41.  Definition. 

42-45.  Acceptance  According  to  Tenor, 

46.  Who  may  Accept. 

47.  Delivei-y. 

48-49.  Forms  and  Varieties  of  Acceptance. 

50.  Implied  Acceptance. 

61-52.  Acceptance  on  Separate  Paper. 

53.  Parol  Acceptance  of  a  Bill. 

54-54a.  Acceptance  for  Honor  or  Supra  Protest. 

55.  Time  Allowed  for  Acceptance. 

DEFINITION. 

41.  An  acceptance  is  an  undertaking  by  the  dra^vee  to 
pay  the  bill  when  due.* 

It  will  perhaps  help  the  student  to  understand  the  theory  of  ac- 
ceptance to  present  it  to  bim  as  a  phase  of  the  elementary  theoret- 
ical notion  of  a  contract  as  constituted  by  an  offer  and  acceptance. 

The  acceptance  is  the  assent  to  the  proposition  contained  in  the 
draft,  which  on  its  part  is  an  offer,  and  which  offer  and  assent, 
taken  together,  constitute  a  contract  right  or  relation.  In  its  prac- 
tical aspect  as  a  contract,  it  obviates  the  transfer  of  cash  by  means 
of  credit.  In  the  illustration  under  §  10,  C.  owed  A.  A.,  we 
may  assume,  says  to  B,  "Give  me  cash  for  my  debt,  and  treat  the 
debt  itself  as  cash."  B  agrees  to  this  proposition,  and  A  gives,  as 
an  evidence  of  the  transfer  of  the  debt  to  B,  the  ordinary  draft,  mak- 
ing him  the  payee.  B  then  turns  over  this  evidence  of  indebtedness, 
and  the  right  of  action  along  with  it,  to  D,  and  D,  on  his  part,  to  E. 
E  now  comes  with  the  paper  to  0.  At  this  point  the  relation  of 
the  parties  is  as  follows:  Tlie  right  A  had  to  the  debt  of  C  is  now 
held  by  E  in  the  shape  of  a  piece  of  commercial  paper,  which  E  is 
about  to  present  to  C.    A  is  liable  to  B  for  the  £1,000  B  paid  A; 

•See  Neg.  Inst.  L.  §  220. 


§41)  DEFINITION.  79 

B,  on  his  part,  is  liable  to  D  for  the  £1,000  paid  by  D  to  B;  and  D  to 
E.  As  yet  C  owes  nothing  to  B,  D,  or  E,  and  he  only  owes  A  for 
the  debt  he  owed  him  in  the  first  place.  The  paper  in  E's  hands 
has  been  passing  from  hand  to  hand,  and  used  for  the  payment  of 
debts,  and  accepted  as  such  upon  the  supposed  solvency  of  each  per- 
son who  has  held  and  indorsed  it.  C  now  says,  **Yes,  I  will  pay  this 
£1,000";  and  evidences  his  assent  by  writing  on  the  bill  "Accepted" 
over  his  own  signature.  At  that  moment  he  enters  into  a  contract 
relation  with  the  holder  of  the  bill,  and  also  with  the  various  in- 
dorsers,  that  he  will  pay  the  bill.^  In  other  words,  0  promises  B, 
D,  and  E,  and  each  of  them  severally,  that  he  will  pay  £1,000  to  the 
holder.  Thus,  B,  D,  and  E  may  look  to  either  C  or  A  for  the  £1,000 
they  have  expended,  but  the  condition  implied  is  that  B,  D,  and  E, 
inasmuch  as  they  have  paid  A  for  C's  debt,  will  look  to  C  to  pay 
first,  and,  if  C  does  not  pay,  then  they  will  look  to  A.  This  is  the 
practical  aspect  of  the  theory  of  acceptance. 

It  follows  that  the  drawee,  until  acceptance,  is  a  stranger  to  the 
bill.*  In  Swope  v.  Boss  the  drawee,  who  had  not  accepted  a  bill, 
discounted  it  before  maturity,  and  the  argument  was  that,  in  thus 
cashing  it,  he  had  paid  it.  But  the  court  said  it  was  neither  ac- 
ceptance nor  was  it  payment,  unless  such  was  the  express  intention 
of  the  parties.  So  that  if  a  drawee  receives  and  discounts  a  bill  for 
the  drawer,  and  then  discounts  it  away,  the  drawer,  and  not  the 
acceptor,  is  the  person  who  must  ultimately  pay  the  bill."  But  the 
drawee,  upon  acceptance,  in  the  order  of  liability,  becomes  the  prin- 
cipal debtor.  He  is  precisely  like  the  maker  of  a  promissory  note. 
This  means  that  all  parties  may  look  to  him  to  pay  the  instrument; 

1  The  acceptance  Is  probably  not  complete,  however,  until  delivery.  Post,  p. 
88.  As  to  an  acceptance  being  irrevocable,  see  TRENT  TILE  CO.  v.  BANK,  54 
N.  J.  Law,  33,  23  Atl.  423,  Johns.  Cas.  Bills  &  N.  87. 

a  S\\'OPE  v.  ROSS,  40  Pa.  St.  186;  Chapman  v.  White,  6  N.  Y.  412;  Bellamy 
V.  Majoribanks,  8  Eng,  Law  &  Eq.  523;  Mandeville  v.  Welch,  5  Wheat.  277; 
ATTENBOROUGH  v.  MACKENZIE,  36  Eng.  Law  &  Eq.  562;  DESIIA  v. 
STEWART,  6  Ala.  852;  Tyler  v.  Gould,  48  N.  Y.  682;  Bullard  v.  Randall,  1 
Gray  (Mass.)  605;   Tlernan  v.  Jackson,  5  Pet.  580. 

8  Cliai)nian  v.  White,  G  N.  Y.  412;  Winter  v.  Drury,  5  N.  Y.  523;  Duurun  v. 
Berlin,  GO  N.  Y.  151. 


80  ACCEPTANCE   OF    BILLS    OF    EXCHANGB.  (Ch.   3 

that  no  demand  need  be  made  of  him;  and  that  notice  of  dishonor 
to  him  is  unnecessary, — all  matters  of  moment  in  business  affairs.* 

With  these  shifts  of  liability  on  the  part  of  the  drawee  before  and 
after  acceptance,  there  is  a  corresponding  change  of  liability  on  the 
part  of  the  drawer.  If  the  drawee  refuses  to  accept,  after  having 
promised  so  to  do,  the  drawer  may  either  sue  him  directly  upon  the 
promise  for  all  loss  occasioned,"  or  he  may  fall  back  upon  their  original 
relation  for  his  remedy.  If  it  was  debt,  as  in  the  case  we  put,  he 
must  sue  on  the  indebtedness.  If  the  drawer  had  deposited  funds,  he 
must  demand  them,  and,  on  refusal,  sue  in  tort  or  for  conversion.  In 
such  a  case,  too,  as  we  have  already  shown,  all  prior  parties  must  look 
to  the  drawer  to  be  repaid  the  moneys  they  have  expended  on  taking 
the  bill.  The  drawer  remains,  at  all  times,  the  principal  debtor  on  the 
bill.  On  the  other  hand,  upon  acceptance  the  drawer  is  relieved 
from  primary  liability  upon  the  bill,  and  stands  as  to  the  other  par- 
ties to  the  instrument  in  a  relation  somewhat  akin  to  a  guarantor, 
or,  as  it  is  accurately  put,  in  the  position  of  first  indorser.  He  is 
liable  to  pay  the  bill  if  the  acceptor  does  not.  A  glance  at  the 
example  will  show  the  fairness  of  this.  A  received  from  B  cash  for 
a  debt  C  promised  to  pay;  B  received  cash  from  D;  and  D  from  E. 
If  C  fails  in  his  promise,  the  cash  received  should  be  refunded  in 
the  order  it  was  paid.  This  would  leave  the  controversy  as  it  ought 
to  be  between  0  and  A. 

So  far  as  classification  is  concerned,  acceptances  may  be  classified 
according  to  their  essential  elements,  and  according  to  their  tech- 
nical form.  In  their  essential  elements,  acceptances  are  analogous 
to  the  acceptances  of  offers  in  ordinary  contract  law.  As  with 
the  acceptance  of  the  offer  in  the  ordinary  contract,"  the  accept- 

«  WALLACE  V.  McCONNELL,  13  Pet.  136,  which  contains  cases  on  this 
point;  Foden  v.  Sharp,  4  Johns.  183;  Wolcott  v.  Van  Santvoord,  17  Johns.  247; 
RUSSELL  V.  PHILLIPS,  14  Q.  B.  891;  Jarvls  v.  Wilson,  46  Conn.  90;  COX  v. 
BANK.  100  U.  S.  712.  , 

6  Ilsley  V.  Jones,  12  Gray  (Mass.)  260;  RIGGS  v.  LINDSAY,  7  Cranch,  500; 
Van  Wart  v.  Woolley,  5  Dowl,  &  R.  374;  ALLEN  v.  SUYDAM,  20  Wend.  321; 
Barney  v.  Newcomb,  9  Cush.  (Mass.)  46. 

•  Potts  r.  Whitehead,  23  N.  J.  Eq.  512;  Eliason  v.  Henshaw,  4  W^heat.  225; 
Eads  V.  City  of  Carondelet,  42  Mo.  113;  Corcoran  r.  White,  117  III.  118,  7  N,  B. 
625;  Siebold  v.  Davis,  67  Iowa,  560,  25  N.  W.  778;  Northwestern  Iron  Co.  ▼. 
Meade.  21  Wis.  474;  Clark,  Cont  p.  36. 


§  41)  DEFINITION.  81 

ance  of  the  bill  of  exchange  must,  in  every  respect,  meet  and  cor- 
respond with  the  terms  contained  in  the  bill  itself.  It  must  nei- 
ther fall  within  or  go  beyond  these  terms,  but  must  exactly  meet 
them  at  all  points.^  In  technical  phrase,  it  must  be  according  to 
the  tenor  of  the  bill.  Again,  as  with  the  ordinary  contract,*  an 
offer  made  to  one  person  cannot  be  accepted  by  another.  The 
drawee,  or  some  person  who,  in  view  of  law,  is  the  same  as  the 
drawee,  must  be  the  acceptor,"  In  their  technical  form,  acceptances 
may  be  express  or  constructive,  oral  or  written.^"  Express  accept- 
ances are  those  expressed  in  the  words  of  the  drawee;  constructive, 
those  implied  from  his  acts.  Written  acceptances  are  assents  writ- 
ten either  upon  the  bill  itself,  or  upon  a  piece  of  paper  separate 
from  the  bill.  The  common,  general  principles  governing  the  detail 
of  form  of  a  written  acceptance  are  that  it  need  not  be  dated;  it 
may  be  accepted  by  the  drawee  in  any  name  he  chooses  to  adopt;  ^^ 
it  may  be  placed  upon  a  bill  before  it  has  been  signed  by  the  drawer, 
or  while  otherwise  incomplete,^ ^  or  after  it  is  overdue,  or  after  dis- 
nonor.  With  these  general  observations  as  to  the  nature  and  form 
of  acceptances,  let  us  turn  and  examine  more  carefully  their  specific 
details. 

7  See  post,  §  42. 

•  Price  T.  Easton,  4  Bam.  &  Adol.  433;  Leake,  Cont.  481;  Tuttle  r.  Catlln, 
I  D.  Chip.  366;  Rossman  v.  Townsend,  17  Wis.  95;  Ross  v.  Milne,  12  Leigh, 
204;  Ellison  v.  Jackson  Water  Co.,  12  Cal.  542;  Seaman  v.  Whitney,  24  Wend. 
260;  Fugure  v.  Mutual  Soc.  of  St  Joseph,  46  Vt  362;  Haskett  T.  Flint,  5 
Blackf.  69;    Clark.  Cont.  p.  50a 

9  See  post,  §  46. 

10  STURGES  V.  BANK,  75  111.  595,  Johns.  Cas.  Bills  &  N.  69;  Dull  v.  Brlcker. 
76  Pa.  St.  255;  Averill  v.  Wood,  78  Mich.  342,  44  N.  W.  381;  Peterson  v.  Hub- 
bard, 28  Mich.  197;  Grant  v.  Shaw,  16  Mass.  341;  WELLS  v.  BRIGHAM,  6 
Gush.  (Mass.)  6. 

11  Lindus  v.  Brad  well,  5  C.  B.  591;  ALABAMA  COAL  MIN.  CO.  v.  BRAIN- 
ARD,  35  Ala.  476;   Nlcholls  v.  Diamond,  9  Exch.  154. 

n  London  &  Southwestern  Bank  v.  Wentwortb,  5  Bxch.  Dly.  96;   HARVEY 
r.  CANE,  34  Ijiw  T.  (N.  S.)  64. 
NEG.BILLS.— 6 


82  ACCEPTANCE    OF    BILLS    OF    EXCHANGB.  (Ch.    3 


ACCEPTANCE  ACCORDING  TO  TENOR. 

42.  The  acceptance  must  be  absolute  and  according  to 
the  tenor  of  the  bill  to  bind  all  the  parties  to  it. 

43.  THE  TENOR  OF  THE  BILX.— Is  the  request  in  the 
bill  to  pay  the  money  at  the  time  and  place  and  in  the 
m.anner  mentioned  in  it.  A  change  in  the  acceptance  in 
any  one  of  these  respects  renders  the  acceptance  "quali- 
fied." 

44.  The  payment  of  the  bill  by  the  acceptor  may  be 
made  dependent  on  a  condition.  It  is  then  called  "condi- 
tional" acceptance. 

45.  A  qualified  or  a  conditional  acceptance  is  only  valid — 

(a)  As  to  all  parties  subsequent  to  the  acceptance. 

(b)  As  to  all  prior  parties  "who,  upon  due  notice, 

assent. 

The  general  principle  Is  that,  for  an  instrument  or  an  act  to  be 
an  acceptance,  it  must  be  according  to  the  tenor  of  the  bill.^'  The 
promise  must  be  to  pay  all  the  money  called  for  in  the  bill,  for, 
if  a  bill  be  accepted  for  only  part  of  that  sum,  it  would  result  in 
splitting  up  the  right  of  action  on  the  bill,  part  being  chargeable 
to  the  acceptor,  and  part  to  the  drawer;  it  would  necessitate  a  par- 
tial protest  for  non-acceptance  and  for  non-payment;  and  lastly, 
on  payment,  the  drawee  would  be  entitled  to  demand  the  possession 
of  the  bill,  and  his  possession  of  it  would  be  presumptive  evidence 
of  the  payment  of  the  whole  bill,  though  he  has  in  fact  paid  only 
part  of  it  These,  of  course,  are  grave  reasons  against  such  an  in- 
strument acting  as  a  circulating  medium.  So,  also,  equally  grave 
business  objections  exist  against  modifying  the  assent  to  the  bill, 

13  WEGERSLOFFE  v.  KEENE,  1  Strange,  214;  BOEHM  v.  GARCIAS,  1 
Camp.  425,  note.  This  vras  on  a  bill,  "payable  in  effective  and  not  in  vals 
reals."  The  drawee  offered  to  accept  payable  In  vals  denaros,  but  this  was  re- 
fused. It  was  held  that  the  plaintiff  had  a  right  to  so  refuse,  and  that  the  pro- 
posed acceptance  was  not  a  sufficient  acceptance  of  a  bill  drawn  as  was  this 
one.  The  acceptance  should  have  been  general.  GIBSON  v.  SMITH,  75  Ga. 
34;  Shaclielford  v.  Hooker,  54  Miss.  716.    In  PETIT  v.  BENSON,  the  acceptance 


§§  42-45)  ACCEPTANCE    ACCORDING    TO    TENOR.  83 

as  to  the  time,  place,  or  manner  of  its  payment,  or  making  its  pay- 
ment conditional.  For  if,  in  tbe  illustration  under  §  10.  the  bill 
was  a  6-months  bill,  and  B,  D,  and  E  were  indorsers  upon  it,  and  the 
bill  were  payable  in  Jamaica,  B,  D,  and  E,  as  indorsers,  mij^jht  make 
all  their  calculations  to  pay  the  money  at  that  time  and  place  if  C, 
the  acceptor,  did  not  It  would  therefore  be  an  injustice  and  hard 
ship  to  B,  D,  and  E  if  C  were  to  accept  the  bill  in  three  months, 
payable  at  London,  England,  because,  if  C  did  not  pay  at  that  time 
and  place,  the  holder  might  sue  B,  D,  and  E,  who  had  every  right  to 
expect  that  they  would  not  be  called  upon  to  pay  until  after  the 
expiration  of  6  months,  and  then  at  Jamaica.  Thus  such  a  rule  is 
necessary  to  protect  the  other  parties  to  the  bill  who  act  as  sureties 
or  guarantors.  And,  taking  all  things  into  consideration,  it  is 
wiser  to  disallow  than  to  allow  them. 

But  the  student  must  not  understand  that  such  acceptances  in 
themselves  are  bad.  They  promise  to  pay  the  bill.  They  create 
contract  rights  upon  the  consideration  which  would  have  rendered 
the  acceptance,  had  it  been  given  in  the  ordinary  form,  binding.  They 
are  contracts  valid,  but  so  inconsistent  with  the  contracts  of  the  in- 
dorsers acting  as  sureties  or  guarantors  that  they  are  impracticable 
and  hence  not  allowed  to  be  enforced.  Where,  however,  they  do 
not  prejudice  the  rights  of  the  indorsers,  or  in  other  words,  where 
the  modification  of  the  tenor  of  the  bill  is  such  that  it  either  casts 
no  hardship  upon  the  indorser,  or  where  the  indors^er  or  parties 
prior  to  the  acceptor  know  of  the  modification  and  assent  to  it,  there 
the  reason  for  rejecting  it  as  a  form  of  acceptance  ceases  to  exist, 
and  so  the  rule  is  that  a  modified  or  qualified  acceptance  if  imma- 
terial, or  if  known  and  assented  to,  is  a  valid  acceptance.^*    If  it 

was,  "I  do  accept  this  bill  to  be  paid  half  in  money  and  half  in  bills."  It  was 
held  that  a  partial  acceptance  would  charge  the  acceptor,  but  also  tliat  it  nii^iht 
be  refused  and  protested  by  the  one  to  whom  the  bill  was  due,  so  as  to  charge 
the  first  drawer.  Comb.  452.  In  an  action  upon  a  bill  of  exchange,  it  was 
held  that,  where  the  day  of  payment  was  past  at  the  time  of  acceptance,  an 
agreement  to  pay  secundum  tenorem  et  eCfectum  billae  was  equivalent  to  a 
general  acceptance,  for  the  reason  that  It  was  then  imiwssible  to  pay  as  Is  di- 
rected In  the  bill.  JACKSON  v.  PIGOl"!',  1  Ld.  Kayni.  :iCA:  Ford  v.  Angelnxlt. 
37  Mo.  50,  Johns.  Cas.  Bills  &  N.  7G;  SWOPE  v.  ItUSS,  40  Pa,  St  18(1.  See 
Neg.  Inst.  L.  §  220. 

1*  In  SMITH  v.  ABBOTT  the  defendant  accepted  a  bill  to  pay  when   the 


84  ACCEPTANCE    OF    BILLS    OF    EXCHANQB.  (Ch.   5 

Is  a  material  alteration  of  the  terms  of  the  bill,  and  is  not  known 
and  assented  to,  then  it  is  invalid.  If  the  modilication  is  known  and 
assented  to,  then  the  parties  enter  into  a  new  contract  Parties 
subsequent  to  the  modified  acceptance  of  course  enter  into  the  con- 
tract on  the  basis  of  the  acceptance  as  modified  and  are  bound  by 
it.  Parties  prior  to  it,  who  assent,  waive  their  right  to  object  and 
create  as  against  themselves  a  right  in  the  holder  akin  to  an  estop- 
pel. The  materiality  of  an  alteration  in  the  tenor  of  the  bill  is  well 
brought  out  in  two  cases,  one  of  which  was  where  the  draft  was 
addressed  to  Cobourg,  and  accepted  payable  at  Port  Hope,  a  town 
some  miles  distant;^"  in  the  other,  where  the  bill  was  drawn  pay- 
able in  New  York  generally,  and  accepted  payable  "at  Continental 
Bank,  New  York."*  In  this  last  case  the  fixing  or  designathig  a 
specific  place  in  the  city  to  which  the  bill  was  addressed  was  no 
hardship, — no  material  change;  while  compelling  an  indorser  to  be 
ready  at  some  distant  place  was  a  hardship  and  a  material  change. 
There  is  a  further  distinction  maintained  by  the  authorities,  which 
is  perhaps  rather  of  form  than  of  substance.  Where  the  accep- 
tance vai'ies  the  offer  contained  in  the  bill  as  to  the  time,  place,  or 
mode  of  payment,  it  is  a  qualified  acceptance.^*  Where,  however^ 
a  variation  is  introduced  into  the  acceptance  of  the  bill  in  the  na- 

goods  for  which  It  was  drawn  were  sold.  As  the  plaintiff  submitted,  this  was 
held  good,  though  the  plaintiff  might  have  refused  such  acceptance,  and  have 
protested  the  bill.  2  Strange,  1152.  In  WALKER  v.  ATWOOD  a  bill  without 
a  day  of  payment  was  accepted  by  the  drawee  to  be  paid  on  a  certain  date 
after  it  was  presented.  Although  bills  without  such  date  when  payable  are 
due  at  sight,  In  an  action  against  the  acceptor  the  acceptance  was  held  good. 
Yet  by  the  acquiescence  of  the  holder  in  the  qualified  acceptance  prior  holders 
would  have  been  discharged,  11  Mod.  190.  Shaclielford  v.  Hooker,  54  Miss, 
716,  Johns.  Cas.  Bills  &  N.  78,  "An  acceptance  Is.  either  general  or  qualified. 
A  general  acceptance  assents  without  qualification  to  the  order  of  the  drawer. 
A  qualified  acceptance  in  express  terms  varies  the  effect  of  the  bill  as  drawn.'" 
Neg.  Inst.  L.  §  227, 

IB  NIAGARA  DIST.  BANK  v.  MANUFACTURING  CO.,  31  Barb.  403. 
But  see  Brown  v.  Jones,  125  Ind.  375,  25  N.  E.  375. 

•  TROY  CITY  BANK  v.  LAUMAN,  19  N.  Y.  477.  "An  acceptance  to  pay  at 
a  particular  place  is  a  general  acceptance,  unless  it  expressly  states  that  the 
bill  Is  to  be  paid  there  only,  and  not  elsewhere."  Neg.  Inst.  L.  S  228.  "An  ac- 
ceptance is  qualified  which  is  *  *  *  local;  that  Is  to  say,  an  acceptance 
to  pay  only  at  a  particular  place."  etc.     Id.  §  229. 

i«  Byles,  Bills,  316;   Story,  BiUs,  §  204;  Daniel,  Neg.  Inst.  |  515. 


§§  42—45)  ACCEPTANCE    ACCORDING    TO    TENOR.  85 

ture  of  a  condition,  the  acceptance  is  called  "conditional."  f  In  the 
last  class  of  cases  the  plaintiff  as  a  part  of  his  case  must  show  that 
the  condition  has  been  performed  before  the  liability  of  the  acceptor 
<3an  be  deemed  to  have  accrued.*'  A  common  example  of  this  is 
an  acceptance  to  pay  "when  in  funds,"  *"  which  means  that  when 
the  acceptor  has  cash  which  the  drawer  has  a  right  to  demand  and 
receive  he  will  then  pay  the  bill.^*  This  manner  of  acceptance,  as 
well  as  the  qualified  one,  creates  a  new  contract,  and  is  governed 
by  the  rules  and  reasons  we  have  just  laid  down.  The  holder  may 
elect  to  reject  it  altogether,  and  at  once  give  notice  either  of  non- 
acceptance  or  of  protest,  or  he  may,  if  willing  to  accept  the  offer, 
give  notice  to  prior  parties,  and  they  in  turn  may  assent  to  it,  and 
thus  become  bound.*  This  is,  however,  not  always  the  rule  with  re- 
gard to  the  drawer  as  a  prior  party.  If,  as  is  sometimes  the  case, 
the  drawee  makes  a  draft  upon  a  drawee  without  having  a  right  to 
do  so,  there  is  no  more  reason  why  the  courts  should  release  him 
from  his  contract  than  that  they  should  seek  to  protect  him  by 
giving  hins  notice  of  dishonor  in  case  of  a  refusal  to  accept  or  to 
pa^y.  In  botk  cases  the  holder  is  injured  by  the  act  of  the  drawer, 
und  in  both  ccses  the  drawer  is  held  bound.^* 

t  Neg.  last.  L.  §  229,  classes  qualified  acceptances  as  (1)  conditional;  (2)  par- 
tial; (3)  local;  (4)  qualified  as  to  time;  and  (5)  where  the  acceptance  is  of  some, 
but  not  all,  of  the  drawees. 

17  Gammon  v.  SchmoU,  5  Taunt.  344;  Nagle  v.  Homer,  8  Cal.  358;  Read  v. 
Wilkinson,  2  Wash.  C.  C.  514,  Fed.  Gas.  No.  11,611;  Gooding  v.  Underwood,  89 
Mich.  187,  50  N.  W.  818;  Ferguson  v.  Davis,  65  Mich.  677,  32  N.  W.  892; 
STORER  V.  LOGAN,  9  Mass.  55. 

18  SMIl'H  V.  ABBOTT,  supra;    Marshall  v.  Clary.  44  Ga.  513. 
iBWINTERMUTE  v.  POST,  24  N.  J.  Law,  420;    Campbell  v.  Pettengill,  7 

Greenl.  (Me.)  126;   Owen  v.  Lavine,  14  Ark.  389. 

♦"When  the  drawer  or  an  Indorser  receives  notice  of  a  qualified  acceptance, 
he  must,  within  a  reasonable  time,  express  his  dissent  to  the  holder,  or  he  will 
be  deemed  to  have  assented  thereto."     Neg.  Inst.  L.  §  230. 

*•  Daniel.  Neg.  Inst.  8  511. 


86  ACCEPTANCE    OF    BILLS    OF    EXCHANGE.  (Ch.  Z 


WHO  MAY  ACCEPT. 

46.  The  only  person  permitted  by  the  law  merchant  to 
be  an  acceptor  is  the  person  to  -whom  the  bill  is  addressed. 
Another  person  is  liable  only  upon  a  collateral  undertak- 
ing. 

EXCEPTION— An  acceptor  for  honor. 

The  arbitrary  custom  of  merchants  is  said  by  the  courts  to  be  the 
reason  of  this  rule.f  Though  it  is  not  the  language  of  the  courts, 
yet  it  so  coincides  with  the  fundamental  theory  of  contracts  that 
we  add  as  an  additional  reason  that  no  person  other  than  the  drawee 
can  be  acceptor,  because  such  a  person  would  be  in  a  measure  a 
stranger  to  the  contract.**  He  is  not,  as  appears  from  the  face  of 
the  instrument,  indebted  to,  nor  has  he  funds  of,  the  drawer.  It 
is  true,  his  intention  may  have  been  to  signify  to  the  parties  to  the 
bill  that  he  was  willing  to  pay  and  would  pay  the  instrument.  But 
he  was  not  the  person  to  whom  the  proposition  or  on  whom  the 
order  was  made.  He  was  not  a  party  to  the  contract.  If  the  courts 
were  to  treat  him  as  an  acceptor,  they  would  make  a  contract  for 
the  drawer  with  a  party  with  whom,  as  far  as  it  can  be  gathered 
from  the  bill,  the  drawer  had  no  intention  of  contracting.  This, 
though  somewhat  vaguely  stated,  seems  to  be  the  underlying  prin- 
ciple in  Walker  r.  Bank  of  State  of  New  York,"  In  that  case  the 
bill  was  addressed  to  Mr.  E.  C.  Hamilton,  of  New  York,  and  was 
"accepted  payable  at  American  Ex.  Bank.  [Signed]  Empire  Mills. 
By  E.  C.  Hamilton,  Treas."  The  question  was  whether  this  was  an 
acceptance,  and  the  court  said  this  was  an  acceptance  of  the  Empire 
Mills,  not  a  party  to  the  contract.  This  point  is  brought  out  more 
clearly  in  some  of  the  English  cases.  In  Jackson  v.  Hudson  ^^  a 
bill  was  addressed  to  Mr.  I.  Irving,  and  accepted,  "I.  Irving.  Jo- 
seph Hudson."     This  was  a  case  for  sale  of  goods  to  Irving.      Hud- 

t  See  Neg.  Inst.  L.  §  220. 

ai  Heenan  v.  Nash,  8  Minn.  407  (GU.  363),  Johns.  Cas.  Bills  &  N.  65;  RA 
BORG  V.  PEYTON,  2  Wheat.  385. 

»2  WALKER  V.  BANK,  13  Barb.  636;    Id.,  9  N.  Y.  582. 
»»  JACKSON  V.  HUDSON,  2  Camp.  447. 


§  4G)  WHO    MAY    ACCEPT.  87 

son  accepted,  by  way  of  making  the  acceptance  doubly  sure.  But 
Lord  Ellenborougli  said  Hudson's  undertaking  was  a  collateral  one. 
Yet,  whatever  its  effect,  it  was  not  an  acceptance.^*  This  rule  is 
subject  to  exceptions,  to  some  of  which  we  have  before  called  atten- 
tion. We  have  seen  that  if  it  were  clear  to  whom  the  bill  is  meant  to 
be  addressed,  and  the  acceptance  is  made  by  such  a  person,  then  the 
acceptance  is  sufficient.  This  is  based  upon  the  case  of  Gray  v. 
Milner,*'  where  an  instrument  was  addressed  "Payable  at  No.  1 
Wilmot  St.,"  and  the  words  "Accepted,  Charles  Milner,"  were  treat- 
ed as  a  proper  acceptance,  because  such  an  address  could  only  mean 
the  person  residing  there.  This  rule  has  been  followed  in  this 
country,  and  it  is  now  probably  the  law.  In  addition  to  this  ex- 
ception, there  are  others.  A  draft  may  be  accepted  by  some  drawee 
other  than  the  one  named,  provided  in  the  draft  there  was  a  mis- 
nomer as  to  the  drawee  and  it  was  accepted  by  the  person  to  whom 
it  was  intended  to  be  addressed.^^  The  acceptor  for  honor — a 
branch  of  this  subject  to  be  discussed  later  on — is  also  a  modifica- 
tion of  this  rule.  Besides  these  instances,  an  agent  may  accept  for 
and  in  the  name  of  the  principal,^*  but  not  in  his  own  name,  because 
that  is  his  individual  acceptance,  and  not  the  acceptance  of  the 
drawee.^'     If  the  bill  be  addressed  to  the  agent,  he  cannot  accept 

2*  DAVIS  v.  CLARKE,  6  Q.  B.  16.  In  this  case  the  maker  drew  a  bill  of 
exchange  payable  to  himself  or  order,  and  addressed  also  to  himself,  and  a 
third  party  wrote  his  name  under  the  word  "Accepted."  It  was  held  that  such 
third  party  could  not  be  sued  as  an  acceptor,  on  the  ground  that  he  was  not 
the  acceptor  of  a  bill  of  exchange  directed  to  him.  See,  also,  MAY  v.  KELLY, 
27  Ala.  497;  Steele  v.  McKinlay,  43  Law  T.  (N.  S.)  358;  WALTON  v.  WIL- 
LIAMS, 44  Ala.  347. 

28  GRAY  V.  MILNER,  8  Taunt.  739.     See  criticism  of  this  case,  ante,   p.  68. 

27  Hascall  v.  Life  Ass'n,  5  Hun,  151. 

28  Thom.  Bills,  211. 

28  Daniel,  Neg.  Inst.  §  487.  A  bill  was  directed  to  an  unincorporated  com- 
pany, and  was  accepted  for  It  by  one  of  its  members,  who  signed  as  manager. 
In  an  action  on  this  It  was  claimed  that  such  acceptance  did  not  bind  the  party 
accepting,  because  he  had  no  authority.  This,  however,  was  held  not  to  alTCect 
his  personal  liability,  as  it  was  shown  that  he  was  one  of  those  associated  un- 
der the  name  of  the  company  to  whom  the  bill  was  directed.  OWEN  v.  VAN 
I'STER.  20  Law  J.  C.  V.  01.  To  the  same  purpose,  see  Nichulls  v.  Diamond,  0 
Exch.  154- 


88  ACCEPTANCE    OF    BILLS    OF   EXCHANGB.  (Ch.  3 

it  in  behalf  of  his  principal.'"     An  acceptance  in  blank,  where  the 
bill  is  incomplete,  and  is  afterwards  to  be  filled  in,  is  valid.** 


DELIVERY. 

47.  An  acceptance  is  probably  complete  only  upon  de- 
livery. 

It  is  maintained  by  Professor  Ames  that  an  acceptance  is  com- 
plete without  delivery  because,  as  he  says,  the  delivery  of  a  bill  or 
note  is  necessary  only  for  the  purpose  of  creating  or  transferring 
title;"  and  an  acceptance  has  no  effect  upon  the  title  to  the  bill, 
and  is,  therefore,  complete  the  moment  it  is  written  upon  the  bill, 
animo  contrahendi.  In  support  of  this  position  he  cites  WILDE  v. 
SHERIDAN."  In  this  case  the  question  was  whether  the  judge  of 
the  Norfolk  county  court,  whose  jurisdiction  was  local  and  depend- 
ent upon  the  accrual  of  the  cause  of  action  within  the  county,  had 
jurisdiction  over  a  case  where  the  defendant  signed  an  acceptance 
in  London,  England,  and  sent  it  by  mail  to  Norwich,  Norfolk  county. 
The  court  held  that  the  contract  was  made  in  London,  and  not  in 
Norwich,  and  therefore  that  the  whole  cause  of  action  did  not  ac- 
crue within  the  county,  and  hence  that  the  court  had  not  jurisdic- 
tion. Lord  Coleridge,  referring  to  the  argument  that  an  acceptance 
was  like  an  indorsement,  distinguished  the  acceptance  from  an  in- 

«o  TValker  v.  Bank,  9  N.  Y.  582. 

81  LESLIE  V.  HASTINGS,  1  Moody  &  R.  119.  Defendant  gave  A  a  stamp 
with  his  acceptance  in  blank,  authorizing  A  to  draw  for  a  certain  sum  at  a 
specified  date,  and  A  drew  the  bill  on  the  stamp  accordingly.  Held,  in  an  ac- 
tion by  the  indorsee  against  the  acceptor,  that  the  acceptance  was  valid. 
HOPPS  V.  SAVAGE,  69  Md.  513,  16  Atl.  133.  "A  bill  may  be  accepted  before 
It  has  been  signed  by  the  drawer,  or  while  otherwise  incomplete."  Neg.  Inst. 
L.  §  226. 

8  2  2  Ames,  Bills  &  N.  p.  791. 

88  21  Law  J.  Q.  B.  260.  See,  also,  Roff  v.  Miller,  19  Law  J.  C.  P.  278; 
THORNTON  v.  DICK,  4  Esp.  270.  In  BENT^INCK  v.  DORRIEN,  6  East,  199, 
a  bill  on  the  defendants  was  left  by  the  plaintiff,  who  was  Indorsee.  The  de- 
fendants accepted,  but  on  the  next  day  canceled  their  acceptance,  whereupon 
plaintiff  protested  for  nonacceptance.  It  was  held  that,  while  such  acceptancf 
might  be  valid  as  to  a  third  party,  the  plaintiff  had,  by  protesting,  precluded 
hicuself  from  claiming  an  acceptance. 


§§  48-49)  FORMS    AND    VARIETIES    OF    ACCEPTANCE.  89 

dorsement,  and  said:  "One  purpose  of  an  indorsement  is  to  pass 
the  property  in  the  bill,  and  that  purpose  is  not  effected  until  actual 
or  constructive  delivery.  But  the  acceptor  has  no  property  in  the 
bill  before  or  after  acceptance.  He  must  be  supposed  to  receive 
the  drawer's  paper  and  on  it  write  his  promise  without  in  any  way 
altering  the  property  in  the  bill.  He  may,  indeed,  before  any  cora- 
mnnicatioG  to  the  drawer  of  the  act  done,  revoke  it,  but  his  promise, 
unless  so  revoked,  is  complete,  and  takes  effect  from  the  time  when 
it  is  made."  The  reasoning  of  this  case  cannot  be  reconciled  with 
the  earlier  case  of  COX  v.  TROY,'*  where  the  indorsees  of  a  bill  left 
it  with  the  drawee  for  acceptance,  and  he  after  writing  an  accept- 
ance thereon  redelivered  it  with  the  acceptance  crossed  out,  and  it 
was  held  that  he  was  not  liable  as  acceptor,  on  the  ground  that  an 
acceptor  was  at  liberty  to  revoke  an  acceptance  before  redelivery  of 
the  bill.  The  reason  advanced  in  support  of  this  view  was  the  prac- 
tical onf!  that  no  person  could  be  prejudiced  by  permitting  the  drawee 
to  withdraw  his  acceptance  before  redelivery,  and  the  law  is  gen- 
erally laifi  down  in  accordance  with  COX  v.  TROY.'' 

FORMS  AND   VARIETIES  OF  ACCEPTANCE. 

48.  An  acceptance,  if  in  writing,  is  constituted  by  any 
words  from  which  an  intention  to  accept  can  be  gathered. 

49.  An  acceptance,  if  verbal,  is  constituted  by  any  -words 
which  evidence  such  intention  clearly  and  unequivocally, 
if  they  be  addressed  to  the  drawer  or  holder,  and  he 
waive  his  right  to  a  -written  acceptance.  An  acceptance 
may  also  bo  implied  from  conduct  e-videncing  such  inten- 

tiOTX. 

The  foregoing  principal  text  shows  the  form  and  varieties  of  ac- 
ceptances. They  are  acceptances  expressed  in  written  or  spoken 
words,  as  contrasted  with  each  other  and  also  with  acceptances 

•*  5  Barn.  &  AlcL  474. 

»B  DUNAVAN  V.  FLYNN.  118  Mass.  537;  Freund  v.  Bank.  3  Ilun  (N.  Y.) 
689;  Rand.  Com.  Paper,  §  637;  Daniel.  Neg.  Inst.  §  490.  Under  Nf^:.  lust.  I.u 
I  2,  however,  acceptance  Is  complete  without  delivery,  provided  It  be  com- 
municated. 


90  ACCEPTANCE    OF    BILLS    OF    EXCHANGE.  (Cb.   S 

implied  from  merely  the  conduct  of  the  drawee.  Another  variety 
of  the  general  class  is  caused  by  its  being  written  on  a  separate 
piece  of  paper;  and  a  third,  by  its  being  issued  as  a  written,  spoken, 
and  implied  acceptance  before  or  after  the  issuing  of  the  bill.  It 
is  our  purpose  to  first  show  the  underlying  theory  of  an  acceptance, 
and  then  to  show  the  forms  and  general  principles  required  for  an 
acceptance  by  the  law  merchant. 

As  has  been  said,  the  acceptance  is  the  assent  of  the  drawee  to 
the  request  of  the  drawer.  The  question,  then,  is,  what,  under 
the  law  merchant,  will  be  deemed  an  evidence  of  such  assent.^* 
There  are  three  general  classes  based  upon  the  divisions  we  have 
given  above:  Acceptances  in  wa-iting,  acceptances  by  pai'ol,  and 
acceptances  implied  from  conduct 

If  in  writing,  the  courts,  according  to  Judge  Cowen,'^  go  to  the 
length  of  saying  thaFany  form  of  worda  whtcn  do  not  in  themselves 
negative  the  request  of  thejbill  shall  be  tc£a±ed-as^a-calld  acceptance 
Qf^it**  Under  the  common  law,  neither  the  word  "Accepted"  nor 
the  signature  of  the  acceptor  is  necessary.     The  unsigned  words 

««Tn  re  Armstrong.  41  Fed.  381;  Van  Staphorst  v.  Pearce,  4  Mass.  258; 
Peck  V.  Cochran,  7  Pick.  (Mass.)  34. 

8T  SPEAR  V.  PRATT,  2  Hill  (N.  Y.)  582.  Referring  to  the  laxity  of  the 
courts  in  construing  acceptances,  Willes,  J.,  said,  in  SPROAT  v.  MATTHEWS, 
1  Term  R.  185:  "The  court  has  not  of  late  been  very  nice  with  regard  to  what 
shall  be  construed  to  be  an  acceptance;  for  though  formerly  it  was  held  neces- 
sary that  an  acceptance  should  be  in  writing,  yet  of  late  years  a  parol  accept- 
ance has  been  deemed  sufficient;  and,  indeed,  at  present  almost  anything 
amounts  to  an  acceptance." 

•  •  "Where  a  bill  was  drawn  on  the  defendant,  and  he  wrote  across  It:  "Ac- 
cepted. Payable  at  Messrs.  Stevens  &  Co.,"— but  failed  to  sign,  it  was  held 
to  amount  to  an  acceptxince.  The  court,  in  summing  up,  said  that  It  was  of 
opinion  that  the  writing  might  be  valid  in  law,  though  unsigned,  but  that 
whether  It  was  intended  so  to  operate  in  its  unfinished  condition  was  a  ques- 
tion for  the  jury.  DUFAUR  v.  OXEXDEN,  1  Moody  &  R.  90.  In  an  action  of 
assumpsit  by  the  Indorsee  against  the  acceptor,  it  was  proved  that  the  de- 
fendant had  given  a  stamp,  with  his  acceptance  in  blank  to  the  drawer,  and 
authorized  him  to  draw  at  a  certain  date  for  a  specific  amount.  It  was  held 
that  there  was  an  actual  acceptance  in  writing,  with  express  authority  to 
fill  In  the  bill  in  a  particular  manner.    LESLIE  t.  HASTINGS,  1  Moody  &  B. 


§§  48-49)  FORMS    AND    VARIETIES    OF    ACCEPTANCB.  91 

"Seen,"  '•  "Presented,"  *°  "Honored,"  **  or  merely  the  name  of  the 
drawee,*'  or  "I  will  pay  this  bill,"  *'  are  sufficient  acceptances,  and 
evidence  the  fact  merely  that  the  drawee  has  seen  the  bill,  and  does 
not  dissent  from  it  In  many  jurisdictions  written  and  signed  ac- 
ceptances are  required,*  meaning,  according  to  the  interpretation 
of  numerous  cases,  that  an  acceptance  is  sufficient  if  it  be  the  name 
of  the  acceptor  alone,  which  complies  with  the  regulation  that  the 
acceptance  shall  be  in  writing  and  be  signed.**  And  every  holder 
of  a  bill,  presenting  the  same  for  acceptance,  may  require  the  ac- 
ceptance to  be  written  on  the  bill.  A  refusal  to  comply  shall  be 
deemed  a  refusal  to  accept,  and  the  bill  may  be  protested. 
In  jurisdictions  where  acceptances  are  not  required  to  be  in  writ- 

89  Bamet  v.  Smith,  10  Fost.  (N.  H.)  256. 
*o  Pars.  BiUs  &  N.  282. 

41  Anson.  Cont.  401. 

42  SPEAR  V.  PRATT,  2  Hill  (N.  T.)  582. 

43  WARD  V.  ALLEN,  2  Mete.  (Mass.)  53. 

•  The  statutes  differ  In  their  provisions,  some  requiring  the  acceptance  to 
be  In  writing,  and  others  that  it  be  In  writing,  and  signed  by  the  acceptor 
The  American  statutes  are  collected  In  Rand.  Com.  Paper,  §  605.  The  student 
should  consult  the  statutes  of  his  own  state.  The  Negotiable  Instruments 
Law  goes  far  to  reform  and  render  uniform  the  unsatisfactory  condition  of 
the  American  law.  It  provides  that  "the  acceptance  must  be  in  writing,  and 
signed  by  the  drawee"  (section  220);  that  the  holder  "may  require  that  the 
acceptance  be  written  on  the  bill"  (section  221);  and  that,  "where  an  ac- 
ceptance is  written  on  a  paper  other  than  the  bill  itself,  it  does  not  bind 
the  acceptor,  except  in  favor  of  a  person  to  whom  it  Is  shown,  and  who.  on 
the  faith  thereof,  receives  the  bill  for  value"  (section  222).  The  Nego- 
tiable Instruments  Law  is  less  radical  than  the  English  Bills  of  Exchange 
Act  (45  &  46  Vict,  c.  61),  which  (section  17)  provides  that  the  acceptance 
must  be  written  on  the  bill,  and  be  signed  by  the  drawee.  This  was  a  re- 
enactment  of  19  &  20  Vict.  c.  97,  §  6  (1856),  and  of  1  &  2  Geo.  IV.  e.  78, 
J  2  (1821),  which,  however,  applied  only  to  inland  bills.  The  English 
act  thus  gives  complete  recognition  to  the  principle  that  the  obligation  of  the 
acceptor,  like  that  of  all  other  parties  to  negotiable  paper,  should  appear  on 
the  bill  Itself.     2  Ames,  Cas.  Bills  &  N.  787. 

44  The  drawee  of  a  bill  of  exchange  wrote  his  name  across  the  face  of  the 
bill,  without  words  of  acceptance.  This  was  held  to  be  such  an  acceptance 
as  to  bind  him,  even  though  the  statutory  requirements  were  that  the  nc- 
f.'ptance  should  be  In  writing,  and  signed.  SPEAK  v.  PRA'rr,  2  llill  (N.  Y.> 
582. 


92  ACCKPTANCB   OF    BILLS    OF    KXCHANGB.  (Ch.  3 

ing,  or  the  statutes  do  not  otherwise  modify  the  common  law^  parol 
acceptances,  if  assented  to  by  the  holder,  are  permitted.*'  A  parol 
acceptance  is  any  form  of  words  used  by  the  drawee  which  by  rea- 
sonable intendment  can  be  made  to  signify  that  he  honors  the  bill. 
There  are  some  limitations  to  this  rule.  These  words  are  to  be  ad- 
dressed to  the  drawer  or  holder.  They  must  be  assented  to  by  the 
holder.**  They  must  relate  to  an  existing  bill,  for,  if  they  pertain 
to  a  future  bill,  they  will  not  be  deemed  an  acceptance.!  They  must 
be  unequivocal,  for,  if  they  are  equivocal,  they  will  not  be  deemed 
an  acceptance.  In  such  expressions  as  'TTour  bill  shall  have  atten- 
tion," '1  will  pay  the  bill,  but  I  cannot  now,"  *1  will  give  you  a  bill  at 
three  months,"  *^  there  is  no  distinct,  definite  promise  or  agreement 
to  pay  the  bill.  They  were  consequently  deemed  by  the  court  too 
uncertain  to  be  treated  as  acceptances.  The  point  to  be  determined 
is  whether,  by  a  reasonable  construction,  the  words  used  will  show 
that  the  acceptor  recognized  an  immediate  obligation  on  the  part 
of  the  drawee  upon  him,  assented  to  it,  and  declared  himself  bound 
to  the  payment  of  it  as  evidenced  by  the  bill.**     Keeping  in  mind 

*8  Scudder  v.  Bank,  91  U.  S.  406;  STOCKWELL  v.  BRAMBLE.  3  Ind.  428; 
MASON  V.  DOUSAY,  35  111.  424;  STURGES  v.  BANK,  75  111.  595;  St.  Louis 
Nat.  Stockyards  v.  O'Reilly,  85  111.  546;  Lumley  v.  Palmer,  2  Strange,  1000; 
SPROAT  V.  MATTHEWS,  1  Term  R.  182;  Arnold  v.  Sprague,  34  Vt.  402; 
MILLER  v.  NEIHAUS,  51  Ind.  401;   Pierce  v.  Kittredge,  115  Mass.  374. 

48  Story,  Bills,  §§  242-247;  Edw.  Bills  &  N.  §§  416,  417;  Bayley,  Bills  &  N. 
c.  6,  S  109;  JOHNSON  v.  COLLINGS,  1  East,  98. 

t  In  JOHNSON  v.  COLLINGS,  the  bill  on  which  the  action  was  brought  was 
drawn  by  R.  on  defendant,  the  latter  saying  that  If  R.  would  draw  such  bill 
he  would  pay  it  on  matiu-ity.  This  bill  was  subsequently  Indorsed  to  plaintiffs. 
It  was  held  that  such  mere  promise  to  pay  a  nonexisiting  bill  did  not  operate 
as  an  acceptance.    1  East,  98. 

47  Reynolds  v.  Peto,  11  Exch.  418. 

4  8  In  POWELL  v.  JONES,  the  bill  was  given  to  the  defendant  for  acceptance 
by  the  clerk  of  the  plaintiff.  On  calling  for  It  afterwards  the  defendant  said: 
"There  Is  your  bill.  It  Is  all  right."  It  was  held— though  by  what  was 
certainly  a  somewhat  strained  application  of  the  rule — that  these  words  did 
not  amount  to  an  acceptance,  as  they  did  not  evidence  the  defendant's  Inten- 
tion to  bind  himself  to  pay  at  all  events.  1  Esp.  17.  The  words,  "If  yo| 
iv'ill  send  it  to  the  counting  house  again,  I  will  give  directions  for  its  being 
accepted,"  were  held  to  constitute  only  a  couditional  promise,  and  not  U 


§  60)  FORMS    AND    VARIETIES    OF    ACCEPTANCE.  9S 

the  expressions  we  have  quoted,  contrast  them  with  such  ex- 
pressions as  those  used  by  the  drawee  in  a  case  where  a  foreign 
bill  had  been  protested  for  nonacceptance,  and  the  drawee  said, 
"If  the  bill  comes  back,  I  will  pay  it,"  *•  or,  in  another  case,  where 
the  drawee  said,  "Leave  your  bill  with  me,  and  I  will  accept,"  •*  both 
of  which  expressions  were  held  to  be  sufficient  acceptances.  In 
these  last  expressions  there  was  a  distinct  promise  to  honor  the  bill. 
It  is  probably  the  case jthat,^  when  verbal  acceptanceaare^ permitted, 
they  wHTaFthe  present  day  be  construed  with  extreme  RtHfitTif^s. 
It  isjiTTdonbtftdly  the  common  Inw  that  tliey  are  allowab^e.'^  Jiut 
it  is  also_eguany  true  that  they  are  not  in  accord  with  the  trnf> 
theory  of  negotiability.  A  bill  of  exchange  should  have  all  its  in- 
"cTlcia^upon  its  face.  And  this  rule,  with  every  other  that  contra- 
veii'^M  it,  complicateiTv  business  operations,  and  clogs  the  circulation 
of  an  instrument  as  a  medium  of  payment. 


fe;AME  -IMPLIED  ACCEPTANCE. 

5C„  AN  IMPLIED  ACCEPTANCE— Is  any  act  which 
clearly  indicates  an  intention  to  comply  with  the  request 
of  the  drawer,  or  any  conduct  of  the  draw^ee  from  w^hich 
the  holder  is  justified  in  drawing  the  conclusion  that  the 
drawee  intended  to  accept  the  bill,  and  intended  to  be  so 
understood." 

operate-  as  an  acceptance  until  the  bill  was  actually  sent  back.  ANDERSON 
V.  HICK,  8  Camp.  179.  Where  the  defendants  agreed  to  accept  as  soon  as  the 
underwriters  had  settled  a  certain  loss,  It  was  held  that  such  conditional  ac- 
ceptance could  not  be  declared  on  as  an  absolute  acceptance,  when  such  con- 
tiuf,'ency  had  actually  happened.     LANGSTON  v.  CORNEY,  4  Camp.  176. 

♦  8  Cox  y.  Coleman,  Chit.  Bills,  274. 
00  1  Chit.  Bills,  p.  12. 

•  1  In  SPAULDING  v.  ANDREWS,  It  was  shown  that,  shortly  after  a  bill 
was  drawn,  the  payee,  who  was  the  holder,  presented  It  to  the  drawee,  and 
received  verbal  assurance  that  It  would  be  paid  on  maturity.  It  was  held  there 
was  an  acceptance  good  as  to  a  third  party  who  obtained  the  bill  after  such 
parol  acceptance,  though  he  did  not  know  of  the  accepance,  and  that  it 
made  no  difference  as  to  when  a  parol  acceptance  was  made.  If  after  th«  bill 
was  drawn.     48  Pa.  St.  411. 

•»  Daniel,  Neg.  Inst.  S  499;   1  Para.  Notes  &  B.  287. 


94  ACCEPTANCE    OF    BILLS    OF    EXCHANGE.  (Ch.   3 

An  implied  acceptance  is  equally  open  to  the  objections  we  have 
made  to  the  verbal  acceptance,  though  the  doctrine  of  constructive 
OP  implied  acceptance  is  in  itself  consistent  with  justice.  Its  limits 
are  not  exactly  defined.  It  may  arise  where  the  bill  is  detained  for  a 
loiTg^me,  contrary  to  the  usage  of  the  parties,  or  withheld  upon  the 
understanding  that  the  drawee  is  to  accept/*  Where,  however,  the 
detention  is  not  contrary  to  the  usual  diTTTings  between  the  parties, 
or  is  due  to  the  fact  that  the  holder  failed  to  call  for  it,  the  doctrine 
does  not  apply."*"  And  in  general  it  may  be  said  that  mere  reten- 
tion  cannot  amount  to  acceptance. ""  This  follows  from  the  fact 
that,  where  there  is  no  usage  of  the  parties  to  the  contrary,  it  is  the 
duty  of  the  holder  to  call  or  send  for  the  bill,  and  hence  no  impli- 
cation of  acceptance  can  arise  from  the  failure  of  the  drawee  to  re- 
turn. A  fortiori,  a  refusal  to  return  can  give  rise  to  no  such  impli- 
cation, since  the  refusal  plainly  negatives  an  intention  to  accept. 
The  same  remark  api)lies  to  the  destruction  of  the  bill,  which,  like 
refusal  to  return  on  demand,  amounts  to  a  conversion,  but  cannot, 
on  any  sound  principle,  imply  an  acceptance. '*''      In  some  states, 

8*  HALL  V.  STEEL,  OS  111.  231;  Hough  v.  Lorlng.  24  Pick.  (Mass.)  254; 
Nason  v.  Barff,  2  Barn.  &  Aid.  2fi:    Koch  v.  Howell,  6  Watts  &  S.  350. 

0  5  Overman  v.  Hoboken  City  Bank,  30  N.  J.  Law,  61. 

58  JEUNE  V.  WARD,  1  Barn.  &  Aid.  653;  DUNAVAN  v.  FLYNN,  118  Mass. 
537,  per  Gray,  C.  J.;  HOLBROOK  v.  PAYNE,  151  Mase.  383,  24  N.  E.  210; 
Colorado  Nat.  Bank  v,  Boettcher,  5  Colo.  190;  Overman  v.  Bank,  31  N.  J. 
Law,  5G4. 

B7  JEUNE  V.  WARD,  supra.  Here  the  drawee,  after  refusing  to  accept, 
destroyed  the  bill,  and  it  was  held.  Lord  Ellenborough  dissenting,  that  this 
did  not  amount  to  an  acceptance.  Bayley,  J.,  said:  "Where  a  bill  is.  In  the 
usual  course  of  business,  left  for  acceptance.  It  is  the  duty  of  the  party  who 
leaves  It  to  call  again  for  it,  and  to  inquire  whether  it  has  been  accepted  or 
not.  *  •  •  I  forbear  to  say,  at  present,  what  would  be  my  judgment  on 
the  effect  of  a  destruction  of  the  instrument,  by  the  party  with  whom  it 
was  left  for  acceptance,  within  the  reasonable  time  during  which  the  other 
party  might  expect  an  acceptance  of  the  bill.  If  a  party  says  he  has  de- 
stroyed the  bill,  and  that  he  will  not  accept  it,  such  destruction  might  probably 
subject  him  to  an  action  of  trover  for  the  bill;  but  I  cannot  think  it  would 
amount  to  an  acceptance  of  it.  For,  what  is  an  acceptance?  It  is  an  en 
gagement  of  the  one  party  acceding  to  the  proposition  of  the  other;  and  it 
would  be  very  strange,  indeed,  if  a  refusal  on  his  part  could  in  law  be  deemed 
an  acceding  to  the  proposition."    This  case  in  effect  overruled  HARVEY  v 


§§  51-52)  FORMS    AND    VARIETIES    OF    ACCEPTANCE.  95 

however,  it  is  provided  bj  statute  that  if  the  drawee  destroys  the 
bill,  or  refuses  within  24  hours  after  delivery,  or  within  such  other 
period  as  the  holder  may  allow,  to  return  the  bill  accepted  or  nou 
accepted,  he  will  be  deemed  to  have  accepted."®  Such  is  the  pro 
vision  of  the  Negotiable  Instruments  Law."^"  Under  a  former  New 
York  statute  to  this  effect  it  was  held  that  the  statute  did  nof 
cover  the  case  of  a  mere  failure  to  return,  but  referred  to  some^ 
thing  of  a  tortious  character,  implying  an  unauthorized  conversior 
of  the  bill.* 


SAME— ACCEPTANCE  ON  SEPARATE  PAPER. 

61.  If  the  bill  is  in  existence,  for  the  convenience  of 
business  the  acceptance  may  be  on  a  separate  paper,  but 
the  promise  must  be  clear  and  unequivocal. 

52.  If  the  bill  is  not  in  existence,  for  the  convenience 
of  business  the  acceptance  may  be  on  a  separate  paper. 
Its  elements  are: 

(a)  That  the   contemplated   drawee   shall  describe  the 

bill  to  be  draTvn,  and  promise  to  accept  it. 

(b)  That  the  bill  shall  be  drawn  in  a  reasonable  time 

after  such  promise  is  written. 
(0)  That  the  holder  shall  take  the  bill  upon  the  credit 
of  the  promise. 

Acceptances  on  a  separate  paper  are  of  two  classes:  Those  re 
f erring  to  a  bill  in  existence  at  the  time  of  the  acceptance;  and  those 
referring  to  a  bill  yet  to  be  drawn,  and  promising  to  accept  it  when 
drawn.  Theoretically,  as  forcibly  pointed  out  by  Professor  Ames, 
these  acceptances  are  in  defiance  of  the  general  principles  of  the  law 
merchant.  By  this  creation  of  the  law,  one  indorser  who  does  not 
see  the  outside  acceptance  has  no  remedy  against  the  acceptor,  while 

MARTIN,  1  Camp.  425,  note,  where  Lord  Ellenbo rough  held  that  retoiillou  oi 
the  bill  was  an  acceptance. 

B8  llie  statutes  are  collected  In  Kand.  Com.  Paper,  §  020. 

B»  Section  225.     Cf.  §  224. 

•  ilAlTESON  V.  MOULTON,  11  ilun.  2GS.  affirmed  79  N.  T.  627. 


96  ACCEPTANCE   OF    BILLS    OF    EXCHANGE.  (Ch.  S 

his  immediate  indorsee,  who  sees  and  discounts  the  bill  on  the  faith 
of  the  promise,  has  a  remedy  his  prior  indorser  had  not.'**  As  a 
business  expedient,  the  reasons  in  support  of  promises  to  accept 
stated  by  Chief  Justice  Marshall  apply  alike  to  both  classes.'*  "The 
great  motive,"  he  said,  "for  construing  a  promise  to  accept  as  an  ac- 
ceptance, is  that  it  gives  credit  to  the  bill,  and  may  induce  a  third 
person  to  take  it.  If  the  letter  be  not  shown,  its  contents,  whatever 
they  may  be,  can  give  no  credit  to  the  bill;  and,  if  it  be  shown,  an 
absolute  promise  to  accept  will  give  all  the  credit  to  the  bill  which 
a  full  confidence  that  it  will  be  accepted  can  give  it."  His  decision 
closes  with  the  declaration  "that  a  letter  written  within  a  reason- 
able time  before  or  after  the  date  of  a  bill  of  exchange,  describing 
it  in  terms  not  to  be  mistaken,  and  promising  to  accept  it,  is,  if 
shown  to  the  person  who  afterwards  takes  the  bill  on  the  credit  of 
the  letter,  a  virtual  acceptance,  binding  on  the  person  who  makes 
the  promise."  The  reasons  for  this  rule  are  twofold.  One  is  the 
practical  one  that,  without  it,  much  embarrassment  would  be  thrown 
in  the  way  of  commercial  transactions.  A  knowledge  that  a  draft 
will  be  accepted  is  often  of  the  utmost  importance  to  the  drawer  in 
assisting  the  negotiation  of  bills  of  exchange;  and,  if  the  promisor 
was  not  bound  by  what  he  had  written,  extensive  frauds  might  be 
perpetrated.  The  view  which  the  courts  take  is  that  the  rule  pre- 
vents these  frauds,  and  accommodates  the  mercantile  transac- 
tions of  the  country.'^  The  other  reason  was  based  in  its  origin 
upon  the  great  authority  of  Lord  Mansfield  in  England,'^  supported 
in  the  United  States  by  the  opinion  of  Chief  Justice  Kent,'*  that  if 
the  collateral  acceptance  be  shown  to  a  third  person,  so  as  to  excite 
credit,  and  to  induce  him  to  advance  money  on  the  bill,  such  third 
person  ought  not  to  suffer  by  the  confidence  excited.  And  these 
two  reasons  have  generally  prevailed  over  the  strongest  objection 

eo  2  Ames,  BUIs  &  N.  p.  788. 

«i  COOLIDGE  V.  PAYSON,  2  Wheat.  66. 

«2  Greele  v.  Parker,  5  Wend.  414;  RUSSELL  v.  WIGGIN,  2  Story,  213.  Fed. 
Gas.  No,  12,165,  per  Story,  J. 

es  PILLANS  v.  VAN  MIEROP,  3  Burrows,  1663,  afterwards  repudiated  Id 
JOHNSON  V.  COLLINGS,  1  East,  98,  and  BANK  OF  IRELAND  Y.  ARCHER. 
11  Mees.  &  W.  383. 

•*  McEVERS  v.  MASON,  10  Johna.  (N.  Y.)  200. 


§§  51-52)  FORMS    AND    VARIETIES    OF    ACCEPTANCE.  97 

and  severest  criticism  of  the  opponents  of  the  theory,  so  that  it  is  at 
present  established  law.  It  is  the  credit  whif^h  mirh  np,.pptnnrr  nr 
engagement  to  accept  has  given  to  the  bill  which  gives  to  it  its  bind- 

ing  opera|Ioa^°'^ ,  — 

There  is  a  distinction  drawn  between  acceptances  on  separate 
paper  or  promises  to  accept  existing  bills  and  promises  to  accept 
bills  to  be  drawn  within  a  reasonable  time  in  the  future.  It  may  be 
urged  that  this  is  a  distinction  without  a  substantial  difference,  but 
traces  of  it  are  found  everywhere.  The  enactments  of  the  Nego- 
tiable Instruments  Law  are  declarative  of  the  American  law.  The 
statute  enacts; ««  "Sea.  232.  TVTiere  an  acceptance  is  written  on  pa- 
per otli.er  than  the  bill  itself,  it  does  not  bind  the  acceptor  except  in 
favor  of  a  person  to  whom  it  is  shown,  and  who,  on  the  faith  there- 
of, receives:  tha  bill  for  value.  Sec.  223.  An  unconditional  promise 
in  writiii;^  to  accept  a  bill  before  it  is  drawn  is  deemed  an  actual 
acceptance  in  fav^or  of  every  person  who,  upon  the  faith  thereof,  re- 
ceivey  the  bill  for  value."  This  distinction  lies  rather  in  words  than 
in  principle,  for  throughout  both  classes  run  these  three  principles: 
(1)  lu  order  to  make  this  extrinsic  promise  an  nrrrptnucr, -nTdit 
must  be  given  to  it;  (2)  like  every  other  promise  or  contract,  its  su.b- 
ject  matter  must  be  ^finite  or  reasonably  so;  nnd  CR)  the  promise 
must  not  be  a  nudum  pactum.  It  must  be  upon  a  consideration,  or, 
to  expresio  it  as  it  commonly  occurs  in  business  transactions,  the 
holder  or  person  claiming  the  benefit  of  the  promise  must  have  dis- 
counted the-  bill  upon  the  promise.  Tlie  actual  acceptance  andjlie 
promiso_to_acccpt  differ  mainly  in  the  remedies  administered  upon 
them.  Wiih  the  actual  ajcepfance  there  iS"but  the~remedy  against 
the  acceptoi  on  the  bill.     With  the  promise  to  accept,  if  there  is  a 

•  8  Thompson,  C.  J.,  In  Goodrich  v.  Gordon,  15  Johns.  6;  Cassel  v.  Dows,  1 
Blatchf.  335,  Fed.  Ca8.  No.  2,502;  Worcester  Bank  v.  Wells,  8  Mete.  (Mass.) 
107;  STEMAN  v.  HARRISON,  42  Pa.  St.  57;  Ruiz  v.  Renauld,  100  N.  Y.  25G. 
8  N.  E.  182;  Murdocli  v.  Mills,  11  Mete.  (Mass.)  5;  Carucffie  v.  Morrison,  2 
Mete.  (Mass.)  381;  Jones  v.  Bank,  34  111.  313;  PARKER  v.  GREELE,  2  Wend. 
(N.  Y.)  545.  Thlii  is  very  common  as  a  statutory  provision  In  the  laws  of 
various  states.  An  agreement  by  telegram  has  been  held  sufliclent  acceptance. 
NORTH  ATCHISON  BANK  v.  GARRETTSON,  2  C.  C.  A.  145.  51  Fed.  1(58. 
aflirmlng  (G.  C.)  47  Fed.  807,  and  39  Fed.  1G3;  In  re  Armstrong  (O.  C.)  -11 
Fed.  381. 

•«  Post.  p.  472. 

N  EG.  BILLS.— 7 


98  ACCEPTANCE   OF    BILLS    OF    EXCHANGE.  (Ch.   3 

refusal  to  give  acceptance,  the  promisor  is  sued  for  breach  of  ordi- 
nary contract  for  whatever  damage  the  holder  of  the  bill  has  ac- 
tually suffered,  limited  by  the  amount  of  the  bill,  with  interest  and 
costs. 

These  principles  exclude  from  the  operation  of  the  rule  cases 
where  the  indorsee  has  taken  the  bill  in  entire  ignorance  of  the 
promise,  or  where  the  promise  is  made  to  some  person,  not  the  draw- 
er of  the  bill,  and  made  with  no  intention  of  its  being  shown  as  a 
means  of  exciting  credit.  In  such  cases  the  promisor  is  exempted. 
It  is  true  that  some  cases  draw  a  distinction  in  this  respect  be- 
tween existing  and  non-existing  bills,  and  hold  that  an  accei)tance 
of  an  existing  bill,  though  on  a  separate  paper,  is  equivalent  in  ef- 
fect to  an  acceptance  written  upon  the  bill,  and  accrues  to  the  ben- 
efit of  the  holder,  whether  or  not  he  took  the  bill  on  the  faith  of 
such  acceptance.''^  Such  was  the  rule  in  England  before  enact- 
ment of  the  statute  requiring  the  acceptance  to  be  written  upon  the 
bill  itself.f  But  it  is  believed  that  the  prevniling  mleJiLtbe  United 
States  places  acceptances  of  existing  bills  and  promises  to  accept 
noi^existm^  bills. jia_.the  same  footmg  in  tliis  respect,  and  requires 
the  bill  to  bejtaken  on  the  faith  of  the  acceptance.* 

•7  Read  v.  Marsh,  5  B.  Mon.  (Ky.)  8;  MASON  v.  DOUSAY,  35  111.  424; 
STOCKWELL  v.  BRAMBLE,  3  Ind.  428.  See  SPAULDING  v.  ANDREWS, 
48  Pa.  St.  411.  Mr.  Daniel  points  out  (Neg.  Inst.  §  552)  that  the  decisions  on 
this  point  are  in  a  condition  of  inextricable  confusion,  a  result  which  was 
perhaps  inevitable,  the  door  having  once  been  opened  to  recognizing  the 
anomaly  of  extrinsic  acceptances. 

t  WYNNE  V.  RAIKES,  5  East,  514;  Billing  v.  Devaux,  3  Man.  &  G.  5G5; 
Grant  v.  Hunt,  1  C.  B.  44. 

*  EXCHANGE  BANK  v.  RICE,  98  Mass.  298;  Overman  v.  Bank,  30  N.  J. 
Law,  61;  Lugrue  v.  Woodruff,  29  Ga.  648.  In  EXCHANGE  BANK  v.  RICE, 
supra,  Hill  drew  a  bill  to  order  of  Pitman  &  Co.  "against  12  bales  of  cot- 
ton." This  being  indorsed  to  plaintiffs,  they  presented  It  for  acceptance, 
which  was  refused.  In  a  letter  to  Hill  defendant  drawees  explained  that  this 
was  because  no  bill  of  lading  had  been  sent,  but  that  when  the  bill  of  lading 
was  received  they  would  accept  the  draft  Plaintiffs,  having  procured  this 
letter  and  a  duplicate  bill  of  lading,  again  presented  the  bill,  and  protested 
it  for  non-acceptance,  and  subsequently  for  non-payment.  It  was  held  that 
the  letter,  having  been  written  after  plaintiffs  took  the  bill  of  exchange,  and 
not  being  addressed  to  them,  did  not  make  defendants  liable  to  them  as  accept- 
ors.    Gray,  J.,  said:     "The  American  rule  has  the  advantage  of  being  uniform 


§  53)  PAROL    ACCEPTANCE    OF   A  BILL.  99 

There  remains  but  one  more  question  to  be  answered,  and  that 
is,  how  definitely  must  the  letter  describe  the  draft  to  be  binding 
in  law  as  an  acceptance  of  it.  The  letter  need  not  be  an  agree- 
ment in  terms  to  honor  the  draft.  It  may  be  read  in  the  light 
of  the  surrounding  circumstances,  which  may  be  used  by  the  court 
to  aid  in  ascertaining  its  purpose,  and  in  applying  and  interpret- 
ing its  language.  The  absence  of  technical  promissory  words  is 
of  no  practical  moment  where  the  language  employed  is  such  as  to 
import  a  promise  to  pay.'*  It  need  not  contain  a  particular  de- 
scription or  identification  of  the  bill  to  be  drawn.  It  is  enough  if 
it  can  be  shown  that  the  bill  was  drawn  in  pursuance  of  the  au- 
thority to  that  effect.  And  it  is  safe  to  say  from  an  examination 
of  the  authorities  that  in  general  all  that  is  wanted  is  a  gen- 
eral power  to  draw  and  a  reasonable  intendment;  by  this  last  is 
meant  a  statement  of  facts  from  which  a  man  of  ordinary  prudence 
would  infer  that  the  power  related  to  the  bill  which  is  offered  for 
discount  upon  the  supposed  acceptance.  If  this  appears,  it  is  suffi- 
cient. 

PAROL  ACCEPTANCE  OF  A  BILL. 

53.  In  the  absence  of  statute  to  the  contrary,  an  un- 
equivocal parol  promise  to  accept  a  specific  existing  bill 
is  binding.  But  a  promise  to  accept  a  future  bill,  even 
though  the  bill  be  taken  by  the  holder  upon  the  faith  and 
credit  of  such  promise,  is  not  binding  as  an  acceptance. 

It  is  proper  to  say  in  the  beginning  that  the  doctrine  of  parol 
acceptances  should  be  received  with  extreme  caution.  It  is  contrary 
to  the  theory  of  negotiability,  which  requires  the  obligation  of  all 
the  parties  to  appear  on  the  instrument  itself,  and  to  the  general 

In  Its  application  to  all  promises  to  accept  a  particular  bill,  not  made  to  the 
holder  or  written  on  the  very  bill,  whether  made  before  or  after  It  Is  drawn; 
and  of  restricting  within  the  narrowest  limits  the  anomalous  doctrine  of  lia- 
bility to  an  action  upon  negotiable  paper  by  reason  of  anything  not  appearing 
on  the  face  of  the  paper  itself." 

88  Barney  v.  Worthington,  37  N.  Y.  112;  RANK  OF  MTCIIir.AN  v.  EI.Y.  17 
Wend.  (N.  Y.)  508,  512;  ULSTER  COUNTY  BANK  V.  McFAULAN,  5  Hill  (N. 
Y.)  4.32;  Valle  v.  Cerre,  3G  Mo.  575;  NAC.I.E  v.  LYMAN,  14  Cal.  451;  Nilsou 
V.  Bank,  48  IlL  39;  NEVADA  BANK  y.  LUCE,  139  Mass.  488,  1  N.  E.  920. 


100  ACCEPTANCE    OF    BILLS    OF    EXCHANGE.  (Ch.    5 

policy  of  law  because  of  tlie  vague  and  often  uncertain  evidence  by 
which  the  acceptance  itself  is  proved.  But  it  is  uudoubtedly  the 
law  that  oral  acceptances  of  existing  bills  ^'  are  valid  and  binding 
acceptances.  The  reasuirs  given  Tor  this  rule  are  much  the  same  a& 
those  given  for  separate  acceptances  in  writing.  A  verbal  promise 
is  treated  as  an  acceptance  because  sound  principles  of  morality 
require  that  one  who  promises  another,  although  by  parol,  to  ac- 
cept a  particular  bill  of  exchange,  and  thereby  induces  him  to  ad- 
vance his  money  upon  such  bill  in  reliance  upon  such  promise, 
should  be  held  to  make  good  his  promise.  The  party  advances 
money  upon  an  original  promise  upon  a  valuable  consideration,  and 
the  promisor  is  bound  to  carry  out  his  undertaking.  Whether  it  is 
held  to  be  an  acceptance,  or  whether  he  is  subject  to  damages  for 
a  breach  of  his  promise  to  accept,  or  whether  he  is  held  to  be  es- 
topped from  impeaching  his  word,  is  a  matter  of  form  merely.  The 
result  in  either  event  is  to  compel  the  promisor  to  pay  the  amount  of 
the  bill  with  interest.'^**  It  would  seem  that  this  reason  would  ap- 
ply alike  to  existing  bills  and  to  non-existing  bills,  yet  the  cases 
make  a  distinction.  A  verbal  promise  to  pay  a  non-existing  bill, 
AvP)i  with  the  gyn^^'^'^^ti^n  t^^f^t  the-  bill  is  auba&tfuenilv,  taken 
oa  the-^fttt-h-<)f  JL  doBS-noiL  amount  t.o  an  acceptance,  because  in 
order  to  constitute  an  acceptance  there  ought  to  have  been  a  bill 

89  Scudder  v.  Bank,  91  U.  S.  406;  STURGES  v.  BANK,  75  111.  595;  Dull  v. 
Bricker,  76  Pa.  St.  255;  Nelson  v.  First  Nat  Bank,  48  111.  37;  Elliott  v. 
Miller,  8  Mich.  132.     See  ante.  p.  93. 

TO  TOWNSLEY  v.  SUMKALL,  2  Pet.  170;  BOYCE  v.  EDWARDS,  4  Pet.  Ill; 
Scudder  v.  Union  Nat.  Bank,  91  U.  S.  406;  Scott  v.  Pilkington,  15  Abb.  Prac. 
280;  Bissell  v.  Lewis,  4  Mich.  450;  Williams  v.  Winans,  14  N.  J.  Law,  339; 
BANK  OF  IRELAND  v.  ARCHER,  11  Mees.  &  W.  383.  In  this  case,  a  party 
being  requested  to  accept  a  bill  to  be  subsequently  made,  said:  "Send  it  for 
acceptance  as  usual,  remitting  proceeds  at  the  same  time,  and  I  will  advise 
my  partner."  In  an  action  on  the  bill  it  was  held  that  a  parol  promise  to 
accept  a  bill  of  exchange  afterwards  drawn,  on  the  faith  of  which  promise  the 
bill  is  discounted,  does  not  amount  to  an  acceptance.  JOHNSON  v.  COL- 
LINGS,  1  East.  98;  KENNEDY  v.  GEDDES,  8  Port  (Ala.)  2G3;  MERCAN- 
TILE BANK  V.  COX,  38  Me.  500;  PLUMMER  v.  LYMAN,  49  Me.  229;  WIL- 
SON V.  CLEMENTS,  3  Mass.  1;  Edson  v.  Fuller,  22  N.  H.  183,  188;  Wakefield 
V.  Greenhood,  29  Cal.  GOO;  Pike  v.  Irwin,  1  Sandf.  14;  Taylor  t.  Drake,  4  Strob. 
(S.  C.)  431. 


%  54)  ACCEPTANCE    FOR    HONOR    OR   SUPRA    PROTEST.  101 

in  existence  to  be  accepted.*  And  to  hold  that  the  same  act  would 
be  an  acceptance  or  not,  according  to  the  varying  relations  of  the 
subsequent  holders  of  the  bill,  would  introduce  a  strange  anomaly 
and  confusion  into  the  relation  of  the  parties  to  the  bill,  the  drawee 
being  an  acceptor  as  to  some  and  not  as  to  the  other  indorsees. 
There  is  one  further  objection  to  be  noted  to  parol  acceptances 
which  is  found  in  the  cases.  It  is  that  a  parol  acceptance  is  obnox- 
ious to  that  provision  of  the  statute  of  frauds  which  provides  that 
all  promises  to  answer  for  the  debt  of  another  shall  be  in  writ- 
ing and  signed  by  the  promisor.  It  is  maintained  that  an  acceptance 
is  such  a  prv>mise,  and  particularly  in  the  case  when  it  is  an  accom- 
modation acL^ptance,  because  then  the  acceptor  merely  guaranties 
some  one  else's  debt  But  despite  the  respectable  authority  sup- 
porting tnis  view,  itfe  reasons  do  not  seem  sound.  In  issuing  a  bill 
the  drawer  says;  to  the  drawee,  "Pay  so  much  money  to  the  payee, 
and  I  will  repay  it  to  you,"  and  the  drawee  in  his  acceptance  there- 
upon promisea  to  pay  the  money  called  for  in  the  bill  to  the  payee. 
The  promise*!  are  thus  original  and  independent.  And  if  money 
is  paid  on  the  faith  of  it,  there  is  an  original  consideration  moving 
between  the  parties  to  the  contract.  Damage  to  the  promisee 
constitutes  as  good  a  consideration  as  benefit  to  the  promisor.  And 
where  there  is  a  substantial  credit  given  by  the  party  to  the  drawer 
upon  the  bill,  and  the  party  parts  with  his  present  rights  at  the 
instance  of  the  promisee,  this  promise  is  substantially  a  new  and 
independent  one,  and  not  a  mere  guaranty  of  the  existing  promise 
of  the  drawer.  The  object  of  the  promise  is  to  induce  the  party 
to  take  the  till  upon  the  Credit  of  the  promise,  and,  if  he  so  take  it, 
it  binds  the  promisor.'* 

ACCEPTANCE  FOR  HONOR  OR  SUPRA  PROTEST. 

54.  DEFINITION — An  acceptance  supra  protest  is  an 
undertaking  by  a  stranger  to  the  bill,  after  protest,  for  the 
benefit  of  all   parties  subsequent  to  him  for  whose  honor 

•liANK  OF  IRELAND  v.  ARCFIER,  supra,  note  70.     JOHNSON  v.  COT^ 
LINHS,  1  Enst,  98.     See  ante,  p.  94. 

Ti  TOWNSLEY  v.  SUMRALL,  2  Pet.  170. 


102  ACCEPTANCE    OF    BILLS   OF    EXCHANGE.  (Ch.  3^ 

it   is   made,  and  conditioned   to  pay  the  bill  -when  it  be- 
oomes  due  if  the  original  draw^ee  does  not. 

54a.  Ati  acceptance  supra  protest  may  be  made— 

(a)  After  dishonor  by  non-acceptance. 

(b)  After   protest  for  better  security  after  accept- 

ance. 

The  acpeptance  for  honor  is  nn  pxcpption  to  the  rule  (supra,  § 
46)  that  no  one  but  the  drawee  can  be  an  acceptor.  It  is  not 
commonly  met  with  in  this  country,  and  therefore  it  is  our  purpose 
to  outline  without  much  discussion  the  rules  concerning  it. 

In  its  nature  it  is  a  sort  of  conditional  acceptance,  the  contract 
bejjigy-as-^'e-shall  hereafter  see  (see  post,  §  72),  to  jjay  if,  upon 
further  presentment  of  the  bill  to  the  drawee  for  payment  at  ma- 
turity,  it  is  again  dishonored  and  duly  protested.  The  bill  must 
in  the  first  instance  be  presented  to  the  drawee  and  protested,  be- 
cause the  drawer  and  indorsers  have  a  right  to  a  presentment 
to  and  demand  of  the  drawee  and  also  a  right  to  the  full  legal  form 
of  protest.^'  But  protest  once  being  made,  any  person  not  a  party 
to  the  bill  may  accept  it  for  the  honor  of  any  other  party  to  it,  or 
there  may  be  successive  acceptors  to  the  bill  for  the  honor  of  differ- 
ent parties  to  it,^'  or  any  one  acceptor  may  accept  for  any  or  all 
parties  to  the  bill.  The  method  of  making  an  acceptance  for  honor 
is  for  the  party  to  appear  before  a  notary  public  and  declare  that 
he  accepts  such  protested  bill  in  honor  of  the  drawer  or  indorsers, 
as  the  case  may  be,  and  he  then  in  some  form  of  writing  signifies 
such  acceptance.  Usual  forms  are  "Accepts  S.  P.,"  or  "Accepted 
for  the  honor  of  X."  As  soon  as  this  form  is  complete,  it  is  the 
duty  of  the  acceptor  for  honor  to  notify  the  parties  to  the  bill  for 
whose  honor  he  has  accepted.  Of  course,  no  holder  is  bound  to 
take  the  acceptance  of  such  an  acceptor,  but  having  once  accepted 
it  he  is  bound  by  it  and  cannot  sue  such  party  until  the  matm-ity 
of  the  bill  and  its  dishonor  by  the  acceptoi  supra  protesf* 

T2  story.  Bills,  §  256. 

Ts  Konig  V.  Bayard,  1  Pet.  250. 

74  WILLIAMS  V.  GERMAINE.  7  Barn.  &  C.  468,  1  Man.  &  R.  304.  For  the 
provisions  of  the  Negotiable  Instruments  Law  concerning  acceptance  for  honor, 
see  sections  2S0-2S9,  post,  p.  ^so. 


§  55)  TIME    ALLOWED    FOR    ACCEPTANCE.  103 

There  Is  a  species  of  acceptance  for  honor  known  as  the  protest 
for  better  security.  According  to  Mr.  Chitty/^  "The  custom  of 
merchants  is  stated  to  be  that  if  the  drawee  of  a  bill  of  exchange 
abscond  before  the  day  when  the  bill  is  due,  the  holder  may  protest 
it  in  order  to  have  better  security  for  its  payment,  and  should  give 
notice  to  the  drawer  and  indorsers  of  the  absconding  of  the  drawee; 
and  if  the  acceptor  of  a  foreign  bill  become  bankrupt  before  it  is  due, 
it  seems  the  holder  may  also  in  such  case  protest  for  better  security. 
The  neglect  to  make  this  protest  will  not  affect  the  holder's  remedy 
against  the  drawer  and  indorsers,  and  its  principal  use  appears 
to  be  that  by  giving  notice  to  the  drawer  and  indorsers  of  the 
situation  of  the  acceptor,  or  by  which  it  is  become  improbable  that 
payment  will  be  made,  they  are  enabled  by  other  means  to  provide 
for  the  payment  of  the  bill  when  due."  '* 


TIME  ALLOWED  FOR  ACCEPTANCE. 

55.  The  dra"wee  is  alio  ■wed  a  reasonable  time,  generally- 
held  to  be  24  hours,  -within  -which  to  accept  a  bill  of  ex- 
change. 

Aftpr^prpHpntrnpnt  thp  drawee  IS  entitled  to  a  reasonable  time  to 
/lppif]p  wViPthpy  Qr  not  he  will  accept,  and  this  is  gpnpt-nlly  ho]i}  tp 
Jbej4_bours.'^^  It  is  said  that  this  time  may  be  shortened  bv  the 
departure  of  the  regular  mail  in  the  meantime,_bujLtli's  rule  hnA^not 
been^followed  in  the  United  States."^'  If,  upon  expiration  of  the 
time__allowed,  the  drawee  has  r^t  ^p(>ppfpfj^  it  in  tlir'  flnty  of*  -the 
holdeiLtoDratest  for  non-acceptance."^*  The  Negotiable  Instruments 
Law  provides  that  the  drawee  shall  be  allowed  24  hours,  but  that 
acceptance,  if  given,  dates  from  the  day  of  presentation.*"  A  bill 
may  be  accepted  after  acceptance  has  been  refused,  and  after  pro- 

TB  Chit.  Bills,  383. 

T«  Daniel,  Neg.  Inst.  §  5.'?0.     See,  also.  Ex  parte  "Wackerbarth,  5  Ves.  574. 
TT  Bellasis  v,  Hester,  1  Ld.  Raym.  280;    Ingram  v.  Forster,  2  .1.   P.  Smith 
(Eng.)  243;  Connelly  v.  McKean,  64  Pa.  St.  113;  Case  v.  Burt,  15  Mich.  82. 
T8  Rand.  Com.  Paper,  §  595. 
7  8  luixram  v.  Forster,  2  J.  P.  Smith  (Eng.)  243. 
•0  Section  224.     Cf.  §  225. 


104  ACCEPTANCE    OF    BILLS    OF   EXCHANGE.  (Ch.   3 

test  for  non-acceptance.^^  It  may  also  be  accepted  after  maturity, 
or  after  dishonor,  in  which  case  the  acceptor  becomes  liable  to  pay 
the  holder  on  demand.*' 

81  STOCKWELL  r.  BRAMBLE.  3  Ind.  428;  Rand.  Com.  Paper,  i  596.  But 
the  previous  refusal  discharges  the  other  parties  unlesvs  they  assent  or  the 
bill  was  protested.    2  Ames,  Cas.  Bills  &  N.  789;    Daniel,  iNeg.  lust.  §  491. 

82  Kand.  Com.  Paper,  §  596.  "A  bill  may  be  accepted  •  *  •  when  it 
is  overdue,  or  after  it  has  been  dishonored  by  a  previous  refusal  to  accept,  or 
by  non-payment  Neg.  Inst  L.  $  228.  As  to  acceptance  of  an  incomplete  bill, 
see  ante,  p.  81. 


§  57)  INDORSEMENT.  Jf  106 


CHAPTER  IV. 

INDORSEMENT. 

56.  Definition. 

57.  Formal  Requisites. 
58-59,     Indorsement  in  Blank. 
60-61.     Special  Indorsement. 

62-64.    Indorsement  without  Recourse,   Conditional  and  Restrictive  Indorse- 
ment 

65.  Nature  of  Indorsement. 

66.  Requisites  of  Indorsement. 
67-68.     Irregulai'  Indorsements. 

DEFINITION, 

56.  rNDORSEMEN'T— Is  the  writing  of  the  name  of  the 
indorser  on  the  instrument  "with  the  intent  either  to  trans- 
fer the  title  to  the  same,  or  to  strengthen  the  security  of 
the  holder  by  assuming  a  contingent  liability  for  its  future 
payment,  or  both.  It  strictly  applies  only  to  negotiable 
instruments. 

FORMAL  REQUISITES. 

57.  The  formal  requisites  of  an  indorsement  are: 

(a)  Though  usually  on  the  back  of  the  instrument, 

an  indorsement  is  valid  if  on  its  face,  but  it 
must  be  somewhere  upon  it.  When  by  rea- 
son of  rapid  circulation  the  instrument  be- 
comes filled  with  indorsements,  the  law 
merchant  permits  the  holder  to  paste  on  a 
slip  of  paper  for  his  own  and  subsequent 
indorsements.     This  is  called  an  allonge. 

(b)  The  usual  form  of  indorsement  is   the   signa- 

ture of  the  indorser,  with  or  without  a  di- 
rection to  pay  to  the  indorsee  described,  or 
to  him  or  order.  Any  form  of  words  with 
the  signature  from  which  the  intent  of  the 
holder  to  incur  the  liability  of  an  indorser 
may  be  gathered  is  a  sufiacient  indorsement. 


106  INDORSEMENT.  (Ch.    4 

An  indorsement  is  classed  by  itself  as  a  distinct  body  of 
contract  rights  and  liabilities.  It  has  its  origin  in  and  is  con- 
fined to  negotiable  instruments.^  In  the  illustration  under  §  10,^ 
which  we  have  so  often  referred  to,  B  pays  A  £1,000,  and  A  gives 
the  bill  to  him;  D  pays  B  £1,000,  and  B  indorses  the  bill  to  him; 
and  E  pays  D  £1,000,  and  D  indorses  the  bill  to  him.  In  each  in- 
stance B,  D,  and  E  get  what  for  their  pui-poses  is  as  good  and  better 
than  £1,000  in  gold.  And,  in  turn,  as  B  or  D  was  paid  the  £1,000, 
and  indorsed  the  bill,  he  assumed  some  liability.  He  did  all  he 
could  to  assure  the  indorsee,  who  paid  the  £1,000  to  him,  that  he 
in  turn  would  get  his  money.  He  said  to  the  indorsee:  "You  give 
me  £1,000  in  gold,  which  cannot  be  transported  because  of  its  weight, 
or  £1,000  in  bank  notes,  which  are  inconvenient  to  carry  because 
of  their  danger  of  being  lost,  and  I  will  give  you  a  claim  payable  to 
you  alone,  and  which  at  New  York  or  Charleston  or  Jamaica  will  be 
just  as  good  to  you  as  the  £1,000  in  gold  or  bank  notes  would  have 
been.  You  may  safely  take  this,  because  if  C  does  not  accept  or 
pay  this,  or  A  does  not  pay  this  as  drawer,  I,  to  whom  you  have  paid 
the  £1,000,  will  repay  it  to  you."  •  "A  payee  or  subsequent  holder," 
says  I'rofessor  Ames,  "instead  of  holding  a  bill  and  collecting  it  at 
maturity,  may  wish  to  transfer  his  interest  in  it  to  another,  in  which 
case  he  indorses  the  bill,  i.  e.  he  writes  and  signs  upon  the  back  of 
the  bill  an  order  directing  its  payment  to  the  desired  transferee. 
The  order  is  written  with  mercantile  conciseness,  e.  g.  Tay  A 
[Signed]     X,' — the  other  terms  being  contained  upon  the  face  of  the 

1  Orrick  v.  Colston,  7  Grat.  195;  Bank  of  Marietta  v.  Pindall.  2  Rand.  (Va.) 
475.  In  WHISTLER  v.  FORSTER,  which  was  an  action  by  the  indorsee  of  a 
check  against  the  drawer,  it  was  held  that  the  holder  of  a  bill  payable  to  order 
must  obtain  an  indorsement  and  is  affected  by  notice  of  fraud  if  he  fails  to  do 
so;  and,  though  he  afterwards  obtains  an  indorsement,  yet  if  he  has  mean- 
while acquired  knowledge  of  the  fraud,  he  does  not  acquire  the  rights  of  a  bona 
fide  indorsee.  14  C.  B.  (N.  S.)  248.  In  an  action  against  certain  parties  as 
the  indorsers  of  a  bill  it  was  claimed  that  such  parties  were  liable,  even  though 
tile  indorsement  was  shown  to  be  a  forgery,  on  the  ground  that  the  ^Titing 
must  have  been  by  the  defendant's  authority.  This  was  held  not  to  be  an 
indorsement  such  as  would  entitle  the  plaintiffs  to  recover.  MOXON  v. 
PULLING,  4  Camp.  50;   Dunning  v.  Heller,  103  Pa.  St  2G9. 

2  Ingalls  v.  Lee,  9  Barb.  047;  HiU  v.  Lewis,  1  Salk.  132;  EVANS  v.  GEE, 
11  Pet  80. 


§  57)  FORMAL    REQUISITES.  107 

bill.  The  custom  of  merchants,  however,  has  attached  to  this  order 
of  the  indorser  a  liability  similar  to  that  which  attaches  to  the  or- 
der of  the  drawer.  By  an  indorsement,  therefore,  a  party  not  only 
passes  his  interest  in  the  bill  to  another,  but  also  pledges  his  credit 
for  the  honor  of  the  bill.  In  other  words,  an  indorsement  is  at  once 
a  transfer  and  a  contract."  , 

The  student  must  fully  grasp  this  idea, — that  the  indorsement 
is  n  rnnfrnct,  imrl  n  n,n,„fi.rii.(  (n  nlili.li  ni»  ]r^iy  imrrhmit  nnil  t1ir 
ronrmon  Inw  have  appended  very  peculiar  conditions.  It  is  a  con- 
tract something  in  the  nature  of  a  guaranty,'  something  in  the 
nature  of  a  warranty,  and  to  the  liability  under  which  the  laws 
have  attached  the  very  unusual  conditions  of  presentment,  demand, 
and  notice  of  dishonor.*  Tt  is,  to  hp  suf'P,  ^ti  pviVlpnce  of  fl^_transfer 
of  title,  but  it  is  principally  a  development  of  a  form  of  contract  at 
thejiands  of  the  creators  of  the  body  of  rules  of  the  law  merchant. 
We  may  be  pardoned  in  referring  again  to  the  illustrations  under 
§§  12  and  13.  In  these  instances  the  drawer  or  maker  con- 
tracted to  pay  "John  Smith,  or  his  order,"  meaning  John  Smith,  or 
Bome  person  to  whom  John  Smith  especially  directed  the  sums  of 
money  called  for  in  the  instruments  should  be  paid.  The  only 
construction  of  this  would  be  that  John  Smith  must  direct  payment. 
He  must  direct  it  in  writing.  Until  he  does  so  direct  it,  and  evi- 
dences this  direction  by  writing  it  on  the  instrument,  the  title  to 
the  instrument,  and  the  right  to  the  sum  of  money  called  for  by 
its  terms,  remain  in  him.  But,  when  he  does  direct  it  by  indorsing 
it,  that  (under  the  law  merchant)  shows  to  all  the  world  that  John 
Smith  has  signified  his  wish  that  it  should  be  paid  to  some  person. 

In  the  place  and  form  of  the  words  of  the  indorsement,  the  law 
looks  rather  to  the  intention  of  the  parties  than  to  a  strict  com- 
pliance with  its  usual  forms.  According  to  the  usual  method,  an 
indorsement,  a.s  its  name  implies,  is  written  on  the  back  of  the 
instrument.  And  indeed  this  usual  method  and  this  original  mean- 
ing carry  with  them  such  force  that  it  has  been  held  that  where 

8  Oakley  v.  Boorman,  21  Wend.  (N.  Y.)  588;  KINGSL.\ND  v.  KOEPPE,  13T 
111.  344,  28  N.  E,  48;  Id.,  Johns.  Cas.  Bills  &  N.  118;  DE  PAUW  v.  BANK  OF 
SALEM.  12G  Ind.  553.  25  N.  E.  705,  and  20  N.  E.  151;  Id.,  Johns.  Cas.  Hills  \, 
N.  12S. 

*  OSGOOD'S  ADM'US  v.  AKTT  (G.  C.)  17  Fed.  575,  Johns.  Cas.  Bills  &,  N.  107. 


108  INDORSEMENT.  (Ch.  4 

one  alleges  that  a  note  was  "indorsed"  he  may  be  presumed  to 
mean  that  there  was  writing  of  some  kind  on  its  back.*  But  neither 
this  customary  method  nor  this  original  meaning  are  allowed  by 
the  law  to  prevail  over  the  purpose  and  intention  of  the  parties. 
And  an  indorsement  elsewhere  upon  the  instrument  is  as  much  an 
indorsement  as  though  written  upon  its  back."  It  may,  for  exam- 
ple, be  upon  its  face,^  or  it  may  be,  and  frequently  is,  where  in- 
dorsements have  covered  the  back  of  the  paper,  upon  the  extension 
of  the  instrument  referred  to  in  the  principal  text  as  an  allonge.' 
But  it  must  be  somewhere  upon  the  bill  or  note,  for  if  upon  a  sepa- 
rate pafvr  the  transfer  is  not  an  indorsement,  butan  assignment" — 
and  the  transferrer~cannoravail  hiiiiyelT'ofTlie'^rivileges,  nor  is  he 
subject  to  the  rules  governing  indorsement.  Bo,  too,  in  the  form  of 
words  of  an  indorsement,  the  law  looks  to  the  intention  rather  than 
the  method  of  expression  of  the  parties.  For  while  a  signature  or 
some  of  the  forms  of  words  we  shall  hereafter  discuss  are  the 
usual  forms,  yet  initials,  or  figures,^**  or  writing  in  pen  or  in  pencil, ^^ 
or  a  mark,  if  they  evidence  an  intention  to  indorse,  can  create  a 

6  GORMAN  v.  KETCHUM,  33  Wis.  427. 

e  In  YOUNG  v.  GLOVER,  the  defendants  wrote  their  names  on  the  face  of 
an  accepted  bill,  under  the  name  of  the  acceptor.  It  was  contended  that  this 
was  not  an  indorsement  according  to  the  custom  of  merchants.  The  intention 
of  the  defendants  to  assume  liability  as  indorsers  being  clear,  there  was  held 
to  be  a  good  indorsement,  and  that  the  place  of  writing  was  immaterial.  3 
Jur.  (N.  S.)  637;   Schwenli  v.  Yost,  9  Wkly.  Notes  Gas.  (Pa.)  16. 

7  Ex  parte  Yates,  27  Law  J.  Banlir.  9;  COM.  v.  BUTTERICK.  100  Mass.  12; 
REX  V.  BIGG,  3  P.  Wms.  419;    HERRING  v.  WOODHULL,  29  111.  92. 

8  FOLGER  V.  CHASE,  18  Pick.  (Mass.)  63;  FRENCH  v.  TURNER,  15  Ind. 
59.  Probably  an  indorsement  on  an  attached  paper  would  be  sufHcient,  though 
there  was  in  fact  room  on  the  instrument.  OSGOOD'S  ADM'RS  v.  ARTT  (C. 
C.)  17  Fed.  575,  per  Harlan,  J.  "The  indorsement  must  be  written  on  the 
Instrument  itself  or  upon  a  paper  attached  thereto."     Neg.  lust.  L.  §  61. 

»  Fenn  v.  Harrison,  3  Term  R.  757.  In  this  case  the  indorsement  was  upon 
a  mortgage  which  was  given  with  the  note  as  collateral  security,  and  was  to 
this  effect:  "I  hereby  assign  the  within  mortgage  and  notes  therein  described." 
This  was  held  not  to  be  a  proper  indorsement,  under  the  requirement  that  it 
should  have  been  made  "thereon,"  or  "on  another  paper  annexed,  •  *  ♦ 
^hen  there  are  many  successive  indorsements  to  be  made."    Story.  Bills.  §  204. 

10  BROWN  V.  BANK,  6  Hill  (N.  Y.)  443. 

11  GEARY  V.  PHYSIC,  5  Barn.  &  C.  234. 


§   57)  FORMAL    REQUISITES.  109 

binding  indorsement.  Tliis  rule  is  usually  the  subject  of  discussion 
In  interpreting  words  of  transfer  on  the  back  of  instruments,  which 
seem  to  imply  an  assignment  rather  than  indorsement.  The  most 
often  quoted  instance  of  such  an  expression  is,  "I  hereby  assign  this 
draft,"  which  Gurney,  B.,  declared  "to  amount  to  nothing  more 
than  an  ordinary  indorsement"  ^*  And  the  interpretation  given 
ii.v  iL  -  c^.u?ts  to  such  a  form  of  words,  written  on  instruments  in 
the  i)i:^oe  where  indorsements  are  usually  found,  is  that  the  trana- 
friier,  in  making  the  writing  evidencing  a  transfer,  intended  such 
a  transfer  as  is  usually  made  of  such  instruments.  In  other  woiu.s. 
he  may  be  reasonably  presumed  to  have  intended  to  turn  over  the 
paper  in  the  usual  business  way,  although  he  did  not  choose  business 
words  peculiarly  appropriate  for  that  purpose.  The  usual  business 
way  is  by  indorsement.  Therefore  it  is  reasonable  to  presume  that 
an  indorsement  rather  than  an  assignment  was  intended.  And  so 
such  words,  unless  they  contain  expressions  clearly  showing  an 
iiiti'ution  to  exempt  the  transferrer  from  an  indorser's  liability,  are 
Heated  as  an  indorsement^  It  may  be  that  there  is  one  exception 
to  the  foregoing  rule,  though  there  is  weight  of  contrary  authority. 
It  is  that  where  one  contracts  in  the  form  of  a  guaranty  on  the 
back  of  a  bill  or  note,  he  cannot  be  made  liable  as  an  indorser.^* 

12  Richards  V.  Frankum,  9  Car.  &  P.  221;  MAINE  TRUST  &  BANKING 
CO.  V.  BUTLER,  45  Minn.  506,  48  N.  W,  333;  MARKET  v.  COREY,  108 
Mich.  184,  66  N.  W.  493;  Spencer  v.  Halpern,  62  Ark.  595,  37  S.  W.  711. 
Briggs  V.  Latham,  36  Kan.  205,  13  Pac.  129,  contra. 

13  SEARS  V.  LANTZ,  47  Iowa,  658;  SHELBY  v.  JUDD,  24  Kan.  166;  Fassin 
V.  Hubbard,  55  N,  Y.  465;  HALL  v.  TOBY,  110  Pa.  St.  318,  1  Atl.  369;  AD- 
AMS V.  BLETIIEN,  66  Me.  19.  Lyons  v.  Divelbis,  22  Pa.  St.  185;  Kilpatrick 
V.  Heaton,  3  Brev.  (S.  C.)  92,  contra. 

1*  In  an  action  on  a  promissory  note  it  was  shown  that  the  payee  of  a  note 
transferred  the  same  to  a  third  party,  having  first  written  over  his  signature: 
"I  hereby  guaranty  the  wilhua  note."  It  was  held  by  the  court  that.  Avhere 
the  name  of  the  payee  was  indorsed  on  the  back  of  the  note  in  no  other  form 
than  as  a  signature  to  a  guaranty  fully  written  out,  this  was  not  such  an  In- 
dorsement as  authorized  a  subsequent  holder  to  sue  upon  It  as  Indorsee.  BEL- 
CHER v.  SMITH,  7  Cush.  (Mass.)  482.  CENTRAL  TRUST  CO.  v.  BANK, 
101  U.  S.  08.  Otherwise  where  the  payee  (D)  indorsed  "Pay  E.  [Signed  1  D." 
and  also  "Payment  guarantied.  D."  ELGIN  CITY  BANKING  CO.  v.  ZEl.Cll, 
r,7  Minn.  487,  59  N.  W.  544.  And  see  Tuttle  v.  Bartholomew,  12  Mete.  (Mass.) 
452;  FULLERTON  V.  HILL,  48  Kan.  558,  29  Pac.  583;  Id..  Johns.  Cas.  Bills  &  N. 


110  INDORSEMENT.  (Ch.   4 

A  guaranty  is  declared  by  the  courts  to  mean  a  guaranty,  and  not 
an  indorsement-^"  And  this  one  rule  of  interpretation  differs  from 
the  other  in  that  the  words  are  not  doubtful  words  of  transfer,  but 
are  plain  words,  having  a  plain  legal  meaning.  Hence  it  is  not 
proper  for  courts  to  seek  to  construe  the  meaning  of  words  which 
are  already  settled  beyond  dispute.  It  is  only  their  province  to 
enforce  the  contract  in  the  clear  words  in  which  it  stands,  and  that 
contract  they  will  enforce  as  a  guaranty.^' 

INDORSEMENT  IN  BLANK. 

58.  AN  INDORSEMENT  IN  BLANK.— Specifies  no  in, 
dorsee,  and  the  instrument  so  indorsed  is  payable  to  bear- 
er, and  may  be  negotiated  by  delivery.* 

59.  The  holder  may  convert  a  blank  indorsement  into 
a  special  indorsement  by  \srriting  over  the  signature  of 
the  indorser  any  contract  consistent  "with  the  character 
of  the  indorsement.! 

124.  As  to  liabilities  of  guarantors  and  sureties,  see  Gridley  v.  Capen,  72  111. 
11,  Johns.  Cas.  Bills  &  N.  209;  Read  v.  Cutts,  7  Me.  18G,  Johns.  Cas.  Bills  & 
N.  210;  Temple  v.  Baker  (Pa.  Sup.)  17  Atl.  510.  For  distinction  between  guar- 
antor and  surety,  see  La  Rose  v.  Logansport  Nat.  Bank,  102  Ind.  332,  1  N.  E. 
80.5;   Id.,  Johns.  Cas.  Bills  &  N.  213. 

16  Where  the  payment  of  a  note  is  gxiarantied  subsequent  to  Its  delivery 
there  must  be  a  distinct  consideration.  Had  the  guaranty  been  written  before 
the  delivery,  no  other  consideration  would  have  been  necessary  than  that  Im- 
plied in  the  note.  By  the  statute  of  the  S'tate,  since  the  guaranty  did  not  ex- 
press any  consideration,  it  is  void.  MOSES  v.  BANK,  149  U.  S.  298,  13  Sup. 
Ct.  900.  And  see  LEONARD  v.  VREDENBURG,  8  Johns.  (N.  Y.)  29;  Tinlcer 
V,  McCauley,  3  Mich.  188;  Phelps  v.  Church,  65  Mich.  231,  32  N.  W.  30;  Hunt 
V.  Adams,  7  Mass.  518;  Spaulding  v.  Putnam,  128  Mass.  303;  NATIONAL 
BANK  OF  COMMONWEALTH  v.  LAW,  127  Mass.  72;  Dubois  v.  Mason, 
Id.  37. 

16  BROWN  V.  CURTISS,  2  N.  Y.  225.  But  see  Upham  v.  Prince.  12  Mass. 
14;  Manrow  v.  Durham,  3  Hill  (N.  Y.)  584,  and  cases  cited;  Barrett  v.  May,  2 
Bailey  (S.  C.)  1;  Partridge  v.  Davis,  20  Vt.  449;  Vanzant  v.  Arnold,  31  Ga. 
210;  Judson  v.  Gookwin,  37  111.  28G;  Pattillo  v.  Alexander,  96  Ga.  60,  22  S.  E, 
646;  National  Bank  of  Commerce  v.  Galland,  14  Wash.  502,  45  Pac.  35.— 
holding  a  contrary  doctrine  to  the  apparently  reasonable  doctrine  of  the  text, 

•  This  is  the  language  of  Neg.  Inst.  L.  §  64.     See,  also.  Id.  §  28. 

t  This  is  the  language  of  Neg.  Inst  L.  §  65. 


^§  58-59)  INDORSEMENT   IN    BLANK.  Ill 

In  form  an  indorsement  in  blank  consists  in  writing  merely  the 
name  of  tlie  payee  or  holder  upon  the  back  of  the  instrument.  Thus, 
if  John  Smith,  in  the  illustration  mentioned  in  §  12,  indorsed  the 
instrument  in  blank,  he  would  write  simply  "John  Smith"  on  the 
back  of  it.  How  the  courts  have  interpreted  this  appears  from 
PEACOCK  V.  RHODES  ^'  and  GRANT  v.  VAUGHAN,!*  which  have 
been  generally  adopted  as  the  law. 

PEACOCK  V.  RHODES  was  a  case  of  a  bill  indorsed  in  blank  by 
the  payee  to  a  third  person,  and  stolen  from  the  third  person,  and 
received  by  a  bona  fide  purchaser  for  value.  Lord  Mansfield  said, 
"I  see  no  difference  between  a  note  indorsed  in  blank  and  one  pay- 
able to  bearer.  They  both  go  by  delivery,  and  possession  proves 
property  in  both  cases;"  and  it  was  deemed  that  such  a  bill  is  to  be 
treated  as  so  much  cash,  unless  the  payee  chooses  by  a  specific  in- 
dorsement to  some  person  to  restrain  its  currency.  The  court  con- 
strued the  contract  to  mean  that  the  payee  might  follow  out  the  con- 
tract embodied  in  the  bill,  "Pay  to  John  Smith,  or  such  person  as  he 
directs,"  and  that,  when  he  so  indorsed,  he  was  deemed  to  say,  "You 
may  pay  to  any  one  who  holds  the  bill."  In  GRANT  v.  VAUGHAN, 
the  maker  of  a  note  **  to  bearer  was  sued  by  Grant,  who  gave 
value  for  the  note  to  a  person  who  had  found  it,  and  who  had  no 
right  to  it.  It  was  contended  that  Grant  could  only  recover  from 
the  person  from  whom  he  got  the  note.  But  the  court  construed  the 
contract  of  Vaughan  otherwise.^®  In  these  cases  the  law  goes  to  the 
limit  that  the  true  owner  cannot  recover  in  trover  from  the  bona  fide 
holder. 

The  student  must  keep  in  mind  that  this  relates  only  to  an  instru- 
ment held  by  a  bona  fide  holder.*"    Where  the  instrument  is  not  in  the 

IT  2  Doug.  633. 

18  3  Burrows,  1516. 

•*  The  instrument,  though  called  a  note  In  the  report,  was  a  cheek. 

i»  See,  also,  AIILLEU  v.  RACE,  1  Burrows,  452.  This  was  an  action  In 
trover  to  recover  a  bank  note  payable  to  W.  F.  or  bearer,  on  demand.  The 
note  was  stolen,  and  later  came  into  the  plaintiff's  possession.  Upon  notice 
of  the  robbery,  W.  F.  ordered  payment  stopped  on  the  note.  It  was  held  th:it 
such  note,  when  It  came  into  the  hands  of  a  tiiird  party,  for  value  and  witlioiit 
notice,  could  not  be  followed. 

20  As  to  who  Is  a  bona  fide  holder,  see  JOHNSON  v.  WAY,  27  Olilo  St.  ;?74. 
Johns.  Cas.  Bills  &  N.  185;    DRESSER  v.  CONSTRUCTION  CO.,  U3  U.  S.  HJ. 


112  INDORSEMENT.  (Ch.  4 

possession  of  a  bona  fide  holder,  but  of  the  finder  or  the  thief,  this 
extreme  rule  does  not  apply.  The  instrument  is,  then,  like  all  other 
property.  It  cannot  be  enforced  by  the  wrongful  holder.  But, 
when  once  it  is  in  the  hands  of  the  bona  fide  holder,  then  it  is 
treated  as  money  in  the  ordinary  course  of  business.  Alike  in  case 
of  money  and  of  paper  indorsed  in  blank,  where  either  has  been  stolen 
or  found,  the  true  owner  cannot  recover  after  it  has  been  paid  away 
fairly  and  honestly  upon  a  valuable  consideration,  because  it  is  neces- 
sary for  the  purposes  of  commerce  that  its  currency  should  be  estab- 
lished and  secured. 

Very  much  like  this  general  power,  vested  in  the  payee  or  subse- 
quent indorser,  to  vest  any  lawful  holder  with  the  power  to  enforce 
the  payment  of  the  instrument,''*  is  the  power  conferred  upon  the  in- 
dorsee in  blank  to  write  over  tlie  indorsement  any  contract  consistent 
with  the  character  of  the  instrument  The  authority  followed  in 
most  jurisdictions  is  RUSSEL  v.  LAXGSTAFFE."  There  the  de- 
fendant indorsed  his  name  in  blank  on  five  copper-plate  notes,  the 
body  of  the  notes  being  at  that  time  not  filled  out.  Upon  the  trial,  on 
behalf  of  the  defendant,  it  was  urged  that,  because  these  notes  were 
blank  at  the  time  of  the  indorsement,  they  were  not  promissory  notes; 
and  that  no  subsequent  act  could  alter  the  original  nature  or  opera- 
tion of  the  defendant's  signature,  which,  when  written,  was  a  mere 
nullity.  Lord  Mansfield,  in  deciding  the  case,  used  these  often- 
quoted  words:  "The  indorsement  on  a  blank  note  is  a  letter  of 
credit  for  an  indefinite  sum.  The  defendant  said:  'Trust  Galley 
to  any  amount,  and  I  will  be  his  security."*  The  amount  of  the 
main  instrument  being  left  blank,  an  authority  to  fill  it  in  for  any 
sum  was  implied.  The  terms  of  the  body  of  the  note  or  bill  are 
the  principal  terms  of  the  contract  of  indorsement,  and  nothing  in- 
consistent with  these  can  be  implied  from  the  indorsement.  Says 
Judge  Cowen:  *'     "The  holder  may  put  the  blank  paper  in  any  form 

Johns.  Cas.  Bills  &  N.  187;  Brook  v.  Teague,  52  Kan.  119,  34  Pac.  347;  Id., 
Johns.  Cas.  Bills  &  N,  189;  Lenheim  v.  Fay,  27  Mich.  70;  Rickle  v.  Dow, 
39  Mich.  91. 

21  As  to  the  effect  of  subsequent  indorsements  upon  an  Indorsement  in 
blank,  see  Bailey  v.  Armstrong,  4  Wkly.  Notes  Cas.  381;  Grould  y.  Mortimer, 
Id.  322. 

22  2  Doug.  514. 

28  Dean  v.  Hall,  17  Wend.  214. 


§§58-59)  IKDORSKMENT    IN    BLANK.  113 

which  shall  accord  with  the  intent  of  the  names,  either  as  makers, 
drawers,  payees,  or  indorsers.  This  power  of  the  bona  fide  holder 
depends  upon  the  intent  of  the  parties  not  written  out  in  full,  but 
evinced  by  the  character  of  the  slip  on  which  the  name  appears." 
And  so  an  indorsement  in  blank  signifies  not  only  that  it  was-the 
payee's  or  subsequent  indorser's  mind  and  wish  that  the  money  cajl- 
ed  for  in  the  instrument  should  be  paid  by  the  maker  or  acceptot^to 
whomsoever  should  lawfully  have  it  in  his  possession,  but  also  that 
oveJL.gucb_mdorsement — which  may  be  treated  in  itself  as  a  blank 
general  Boi££^a  subsequent  huldci  might  wjt"  ""T  Tnr.<iifif..a^ion 
of  the-iastfanxant  which  was  not  inconsistent  nor  a  material  altcra- 
tion  of  its  tfcims.^^  He  may  not  write  over  a  blank  indorsement  a 
waiver  of  deiiiand  and  notice;  -"  or  he  may  not  change  such  an  in- 
dorsement into  a  guaranty.^*^  Ho  cannot  split  up  the  instrument, 
making  part  of  the  sum  called  for  in  it  payable  to  one  person,  and 
part  payable  to  anothfrr.-'  All  these  change  the  terms  of  the  con- 
tract as  they  are  implied  in  law.  But,  if  there  are  successive  in- 
dorsemejatc;  ij  blank,  the  holder  may  fill  up  the  first  to  himself,^*  or 

i*  Cafuden  v.  McKoy,  3  Scam.  (111.)  437;  Webster  v.  Cobb.  17  111.  459; 
HANCE  y.  MILLER,  21  111.  636:  MAXWELL  v.  VANSANT,  46  111.  58;  BOYN- 
TON  V.  PIERCE,  79  111,  145;  TENNEY  T.  PRINCE,  4  Pick.  (Mass.)  385; 
Central  Bank  v.  Davis,  19  Pick.  (Mass.)  373.  But  see  Allen  v.  Coffil,  42  lU.  293. 
In  Dale  v.  Gear  it  was  held  that  parol  evidence  was  not  admissible  to  prove 
that  an  indorsement  in  blank  of  a  promissory  note  was  to  be  considered  as 
without  recourse  by  a  special  agreement  between  the  parties,  where  there  was 
no  evidence  of  any  agency  or  equity  as  between  them.  38  Conn.  15.  The 
holder  under  a  blank  indorsement  may  write  over  it  an  order  to  pay  to  another. 
EVANS  V.  GEE,  11  Pet.  80. 

26  CENTRAL  BANK  v.  DAVIS,  19  Pick.  (Mass.)  373. 

26  Seabury  v.  Hungerford,  2  Hill  (N.  Y.)  80;  Blatchford  v,  Melliken,  35  111. 
434;  SEYMOUR  v.  MICKEY,  15  Ohio  St.  515;  BELDEN  v.  HANN.  61  Iowa, 
42,  15  N.  W.  591. 

2  7  Erwin  v.  Lynn,  16  Ohio  St.  547;  LINDSAY  v,  PRICE,  33  Tex.  282.  See 
Neg.  Inst.  L.  §  62. 

28  In  DAY  V.  LTON,  It  was  held  that  although,  by  an  Indorsement  In  blank, 
the  transferee  was  authorized  to  fill  in  the  blank,  he  must  do  so  before  sul>- 
mitting  the  note  In  evidence  in  a  suit  thereon.  6  Har.  &  J.  (Md.)  140.  I'.rew- 
ster  V,  Dana,  1  Root  (Conn.)  206;  Peaslee  v.  Robbins,  3  Mete.  (Mns.s.)  164. 
But  the  weight  of  authority  appears  to  be  contrary.  Sawyer  v.  rnltcrsdn. 
11  Ala.  523;  Glllham  v.  Bank,  2  Scam.  (111.)  245;  Rich  v.  Starbuolc,  .M  Iml.  ST; 
Greenough  v.  Smead,  3  Ohio  St  415.  As  to  the  liability  of  a  spi-ciaJ  iiidorscr, 
NEG.BILLS.— 8 


114  INDORSEMENT.  (Ch.   4 

he  may  deduce  his  title  through  all,  or  he  may  strike  out  any  or  all, 
or  he  may  turn  the  instrument  over  to  a  stranger  without  indorse- 
ment by  himself;  *'  for  all  these  instances  in  no  wise  change  the  ten- 
or of  the  main  instrument,  or  effect  an  alteration  in  the  letter  or 
the  spirit  of  its  terms.  There  is  no  objection  to  injecting  a  special 
indorsement  upon  an  instrument  payable  to  bearer  or  under  an  in- 
dorsement in  blank.  It  merely  limits  the  person  or  class  of  persons 
to  whom  an  indorser  signifies  that  he  is  willing  to  pay  the  instru- 
ment. Such  an  indorser  says,  in  effect,  "I  will  pay  my  indorsee,  and 
such  person  as  he  directs."  Hence,  to  recover  against  such  an  in- 
dorser, title  through  his  indorsee  must  be  proved  by  proving  his 
indorsee's  signature.  Such  a  contract  is  not  inconsistent  with  what 
may  be  supposed  to  have  been  in  the  mind  of  the  indorser  when 
he  wrote  his  name  on  the  instrument.  The  indorsee  may  treat  any 
indorsement  as  transferring  the  instrument  to  himself,  and  may 
change  it  to  a  form  to  express  this  intention. 

Same — Parol  Evidence. 

Whether  parol  evidence  is  admissible  to  contradict  or  vary  the 
implied  terms^f  a  blank  indorsementja-a-q4icotion  upon  which  there 
la_much  conflict  of  authority.  It  is  held  by  some  cases  that  the  rule 
excluding  parol  evidence,  while  applicable  to  special  indorsements, 
which  express  the  contract,  is  not  applicable  to  blank  indorsements, 
under  which  the  contract  arises  by  implication  of  law.'"     The  pre- 

see  JOHNSON  v.  MITCHELL,  50  Tex.  212.  Johns.  Cas.  Bills  &  N.  132;  COLE 
V.  CUSHING,  8  Pick.  (Mass.)  48;   Ellsworth  v.  Brewer,  11  Pick.  (Mass.)  316. 

29  SMITH  v.  CLARKE,  Peake,  225.  In  this  case  a  bill  indorsed  in  blank 
by  payee,  and  with  subsequent  indorsements,  came  into  the  hands  of  J.  under 
a  special  indorsement  J.  sent  the  bill,  without  indorsement,  to  another  party, 
who  discounted  the  same  with  plaintiffs,  who  had  struck  out  all  save  the  first 
Indorsement.  It  was  objected  that  the  instrument  was  affected  by  the  special 
indorsement,  but  it  was  held  that  a  fair  holder  of  a  bill  might  consider  him- 
self the  payor's  indorsee,  and  strike  out  other  Indorsements.  For  a  similar 
holding,  see  MITCHELL  v.  FULLER,  15  Pa.  St.  268;  JOSSELYN  v.  AMES,  3 
Mass.  274;  Sweetser  v.  French,  13  Mete.  (Mass.)  262;  Jackson  v.  Haskell,  2 
Scam.  (111.)  5G5;  BURNAP  v.  COOK,  32  111.  168;  CURTIS  v.  SPRAGUE,  51 
Cal.  239.  Striking  out  an  Indorsement  releases  all  subsequent  indorsers.  Dan- 
iel, Neg.  Inst.  §  694a.     See  Neg.  Inst.  L.  §  78. 

80  Susquehanna  Bridge  &  Bank  Co.  v.  Evans,  4  Wash.  C.  C.  480,  Fed.  Cas. 
No.  13.635;   ROSS  v.  ESPY,  66  Pa.  SL  481;   BRENNEHAN  v.  FURNISS,  90  Pa. 


§§  58-59)  INDORSEMENT    IN    BLANK.  115 

vailing  view,  however,  is  that  there  is  no  distinction  in  this  respect 
between  these  two  classes  of  indorsements,  since  the  contract  im- 
plied by  the  blank  indorsement  is  as  definite  as  if  it  were  express- 
ed.^^ Mr.  Daniel  states  that  there  are  three  classes  of  cases  in 
which  parol  evidence  is  admissible  as  between  indorser  and  in- 
dorsee, not  to  contradict  or  vary  the  contract  imported  by  the  instru- 
ment, but  to  impeach  the  validity  of  the  indorsement:'^  (1)  Evi- 
dence is  admissible  to  show  that  the  indorsement  was  without  con- 
sideration; for  example,  that  it  was  for  the  accommodation  of  the 
indorsee,  or  for  collection,  or  to  transfer  the  legal  title  to  one  in 
fact  the  owner.  (2)  Evidence  is  admissible  to  show  that  the  indorse- 
ment was  in  trust  for  a  special  purpose,  or  as  an  escrow.  (3)  Evi- 
dence is  admissible  to  show  that  the  indorsement  was  obtained  by 
false  representations,  so  that  the  enforcement  of  the  contract  of  in- 
dorsement would  operate  as  a  fraud  upon  the  indorser.  It  is  also 
held  by  some  cases  that  the  indorser  may,  as  against  his  indorsee, 
prove  a  contemporaneous  parol  waiver  of  demand  or  notice  or  dis- 
honor, but  the  opposite  view  is  also  held.'*  A  discussion  of  the  con- 
flicting authorities  upon  the  effect  of  collateral  agreements  cannot 
be  undertaken  in  an  elementary  work.'* 

St.  186;  Davis  v.  Morgan,  64  N.  C.  570;  Commissioners  of  Iredell  Co.  v.  Was- 
fion,  82  N.  C.  312. 

81  Day  V.  Thompson,  65  Ala.  269;  Crocker  v.  Getchell,  23  Me.  392;  Barry 
V.  Morse,  3  N.  H.  132;  Bank  of  Albion  v.  Smith,  27  Barb.  (N.  Y.)  489;  Wood- 
ward V.  Foster,  18  Grat.  (Va.)  200;  Holton  v.  McCormick,  45  Ind.  411;  Schnell 
V.  Mill  Co.,  89  111.  581;  CLARKE  v.  PATRICK,  60  Minn.  269,  62  N.  W.  284; 
Doolittle  V.  Ferry,  20  Kan.  230;  Farr  v.  Ricker,  46  Ohio  St.  265,  21  N.  E.  354; 
Kling  V.  Kehoe.  58  N.  J.  Law,  529,  33  Atl.  946;  Van  Vleet  v.  Sledge  (C.  C.) 
45  Fed.  743.  Prof.  Ames,  however,  maintains  the  opposite  view.  2  Ames, 
Cas.  Bills  &  N.  804. 

8  2  Daniel,  Neg.  Inst  §  720  et  seq. 

8  8  Daniel,  Ncg.  Inst.  §  719a;    Rand.  Com.  Paper.  §  784. 

84  The  subject  Is  fully  discussed  in  Daniel,  Neg.  Inst.  §§  717-723;  Rand.  Com. 
Paper,  §§  778-784. 


116  INDORSEMENT.  (Ch.   4 


SPECIAL  INDORSEMENT. 

60.  A  SPECIAIj  indorsement.— Specifies  the  person 
to  -whom,  or  to  whose  order,  the  instrument  is  payable; 
and  the  indorsement  of  such  indorsee  is  necessary  tO' 
the  further  negotiation  of  the  instrument.^ 

61.  An  instrument  -which  is  originally  payable  to  bearer, 
or  -which  has  been  indorsed  in  blank,  though  after-wards 
specially  indorsed,  is  still  payable  to  bearer;  except  as  ta 
the  special  indorser,  -who,  on  such  an  instrument,  after 
such  an  indorsement,  is  only  liable  on  his  indorsement  to 
such  parties  as  make  title  through  it.^ 

A  special  indorsement  is  in  form  commonly  in  this  wise:  If  it 
were  by  John  Smith,  the  payee  in  the  illustration  under  §§  12  and 
13,  it  would  be,  "Pay  to  the  order  of  John  Jones,"  or  "Pay  to  John 
Jones,  or  order,"  or  simply,  "Pay  John  Jones."  While  the  special 
indorsement,  or  the  indorsement  in  full,  as  it  is  indifferently  called^ 
must  name  the  indorsee,  the  indorsement  need  not  necessarily  be 
in  words  negotiable.  It  may  be  either  "Pay  to  John  Jones,"  or 
"Pay  to  the  order  of  John  Jones."  *^  In  either  case  John  Jones- 
may  negotiate  the  note  away.  This  is  because  the  original  in- 
strument was  negotiable.  It  contemplated  its  passing  from  hand 
to  hand.  Hence,  in  the  illustration,  John  Smith,  the  payee,  may 
direct  that  the  instrument  be  paid  to  John  Jones,  and  John  Jones, 
upon  delivery,  being  the  owner,  may  direct  that  it  be  paid  to 
Thomas  Robinson,  and  the  maker  must  pay  to  Thomas  Robinson, 
or  to  John  Jones,  or  to  John  Smith;  so,  also,  must  John  Jones  pay 

«B  This  is  the  language  of  Neg.  Inst.  L.  §  64. 

8  8  "Where  an  Instrument,  paj'able  to  bearer,  Is  Indorsed  specially,  It  maj 
nevertheless  be  further  negotiated  by  delivery;  but  the  person  indorsing 
specially  is  liable  as  Indorser  to  only  such  holders  as  make  title  through  hi» 
indorsement."     Neg.  Inst.  L.  §  70.     Cf.  Id.  §  28. 

87  "An  Instrument  negotiable  in  its  origin  continues  to  be  negotiable  until 
it  has  been  restrictlvely  indorsed  or  discharged  by  payment  or  otherwise." 
Neg.  Inst.  L,  §  77.  "But  the  mere  absence  of  words  Implying  power  to  nego- 
tiate does  not  make  an  indorsement  restrictive."     Id.  §  6G. 


§§  60-61)  SPECIAL    INDORSEMENT.  117 

to  Robinson,  because  Robinson  has  a  right  of  action  against  Jones, 
and  Jones  against  Smith;  hence  Robinson  has  also  a  right  of  action 
against  Smith.^^ 

When  an  instrument  Is  specially  indorsed,  title  can  only  be  trans- 
ferred from  the  indorsee  by  his  indorsement-  In  the  very  outset, 
this  principle  must  be  sharply  contrasted  with  the  case  of  bills  or 
notes  payable  to  bearer  or  indorsed  in  blank.  With  bills  or  notes 
payable  to  bearer  or  indorsed  in  blank,  the  holder  is  presumed  to 
be  the  owner.  Possession  and  title  are  one  and  the  same  thing, 
and  this  though  the  party  possessing  it  is  in  no  wise  a  party 
to  the  instrument.  But  where  the  direction  in  the  contract  is  to 
pay  specially  to  some  person,  that  person  and  no  other  can  direct 
that  the  money  is  to  be  paid  in  its  turn.^^  No  other  person  can 
personate  this  indorsee,  and  by  forgery-  satisfy  the  conditions  of 
this  contract  And  it  does  not  avail  even  that  the  bill  is  paid  under 
a  forged  indorsement.  Such  payment  or  transfer  was  not  in  con- 
templation of  the  parties  making  the  contract,  and  is  utterly  void.*" 

"8LEAVITT  V.  PUTNAM,  3  N.  Y.  494;  EDIE  v.  EAST  INDIA  CO.,  1  W. 
B1.  295,  2  Burrows,  1216.  In  the  latter  case  it  was  claimed  that  a  special 
indorsement  to  A  B,  ttie  words  "or  order"  being  omitted,  was  equivalent  to 
a.  restrictive  indorsement;  but  it  was  held  that,  since  the  bill  In  Its  origin 
was  negotiable,  whatever  indorsement  carried  the  property  carried  the  power 
to  assign  it.  In  MORE  v.  MANNING  the  holding  was  to  the  same  purpose. 
An  assignment  was  made  to  W.,  and  not  to  him  and  order;  and  it  was 
-claimed  that  W.  could  not  assign,  for,  by  so  doing,  W.'s  assignor  would  be 
liable  to  suit  by  subsequent  indorsees.  It  was  held  that  the  assignee  of  a  bill 
has  all  the  Interest  In  it,  and  may  assign  to  whom  he  pleases.  Comyn,  311. 
Hodges  V,  Adams,  19  Vt.  74, 

89  COLSON  V.  ARNOT,  57  N.  Y.  253;  MEAD  v.  YOUNG,  4  Term  R.  28.  In 
the  case  of  MEAD  v.  YOUNG,  a  note  was  drawn  on  defendant,  payable  to 
"Henry  Davis  or  order,"  but  came  into  possession  of  another  Henry  Davis. 
-The  bill  was  accepted  by  defendant,  and  the  plaintiff,  being  requested  by 
Davis  to  discount  It,  Inquired  of  defendant  If  the  acceptance  was  his.  This 
being  affirmed,  the  bill  was  discounted,  the  plaintiff  not  knowing  Davis.  It 
was  held,  on  an  action  being  brought,  that  as  no  person  can  deui;iii(l  payment 
-of  a  bill  of  exchange  but  the  payee,  or  the  person  authorized  by  him,  the  ac- 
-ceptor  only  undertakes  to  pay  to  them,  and  cannot  be  compelled  to  pay  to 
any  other  person,  and  If  he  makes  such  payment  it  will  not  discharge  his  debt 
to  the  drawer. 

♦  0  fJl'vAVES  V.  BANK,  17  N.  T.  205;  HOLT  v.  ROSS.  54  N.  Y.  472;  CHAM- 
BERS V.  BANK,  78  Pa.  St.  205;    ESPY  v.  BANK,  18  Wall.  GU4. 


118  INDORSEMENT.  (Ch.   4 

In  case  of  the  combination  of  the  two  classes, — indorsements 
in  blanlj  and  in  full, — the  application  of  the  rules  is  somewhat  con- 
fusing to  the  student.  For  example,  let  us  assume  that  there  are 
indorsed  upon  an  instrument  some  blank  indorsements,  then  some 
special  indorsements,  and  after  these  again  some  indorsements  in 
blank.  The  special  indorser  will  be  liable  only  to  those  "who  can 
make  their  title  through  his  special  indorsement."  The  rule  is  well- 
settled  that  if  a  note  or  bill  be  once  indorsed  in  blank,  though  after- 
wards indorsed  in  full,  it  will  still,  as  against  the  drawer,  the  pajee^ 
and  prior  indorsers,  be  payable  to  bearer,  though,  as  against  the  special 
indorser  himself,  title  must  be  made  through  his  indorsee.  Suppose 
the  following  to  be  a  series  of  indorsements:  (1)  John  Smith.  (2) 
Pay  to  the  order  of  Thomas  Robinson,  Richard  Roe.  (3)  Thoma* 
Robinson.  In  such  cases  the  rule  is  laid  down  in  Bank  v.  YSTiite.*^ 
In  that  case,  the  suit  was  upon  a  promissory  note,  payable  to  a  W. 
J.  Worth,  and  made  by  White,  the  defendant.  It  was  indorsed  in 
blank  by  Worth  and  by  E.  Olcott,  and  had  upon  it  a  special  indorse- 
ment, in  these  words:  "Pay  to  E.  Olcott,  or  order.  [Signed]  E.^ 
0.  Kendrick,  Cashr."  It  was  objected  that  no  formal  transfer  of 
the  note  had  been  shown  from  Olcott  But  the  court  said  that^ 
in  suing  the  payee  under  a  blank  indorsement,  this  was  not  neces- 
sary. Worth's  signature  was  sufficient.  Only  in  case  of  suit 
against  Olcott  would  it  have  been  necessary  to  prove  Kendrick's 
signature.  All  the  bank  must  needs  prove  was  the  signature  of 
the  payee  in  blank.  And,  in  the  example  we  are  illustrating,  any 
holder,  to  sue  Richard  Roe,  must  prove  in  addition  to  his  signature 
the  signature  of  Thomas  Robinson,  because  the  indorsement  is  a 
special  order  or  indorsement  to  Thomas  Robinson.*^     But  in  the 

41  Watervliet  Bank  v.  White,  1  Denio,  608;  Pentz  v.  Wlnterbottom,  5  Denio, 
51. 

42  .70HNS0N  V.  MITCHELL.  50  Tex.  212;  SMITH  v.  CLARKE,  1  Esp.  ISO, 
Peake,  225;  WALKER  v.  MacDONALD,  2  Exch.  527,  17  L.  J.  Exch.  377; 
MITCHELL  V.  FULLER,  15  Pa.  St.  268;  Dudman  v.  Earl,  49  Iowa,  37;^ 
BURNAP  V.  COOK,  32  III.  168;  HARROP  v.  FISHER,  30  L.  J.  C.  P.  283.  Ii> 
this  case  a  bill  was  drawn,  payable  to  the  order  of  the  drawer,  one  Johnson. 
The  bill  was  discounted  by  R.,  but  Johnson  failed  to  indorse,  and  subsequently 
left. the  country.  The  acceptor  refused  to  accept,  on  account  of  the  omission 
to  indorse,  and  R.  then  indorsed  to  the  plaintiff  for  Johnson.  It  was  at  first 
decided  that  the  inference  might  be  drawn  that  Johnson  authorized  such  in- 


§§62-64)  INDORSEMENT    WITHOUT    RECOURSE.  119 

other  cases,  the  indorsement  in  blank  would  presuppose  right  and 
possession,  and  merely  the  signature  of  the  indorser  sought  to  be 
recoTered  against  would  have  to  be  proved. 


INDORSEMENT  WITHOUT  RECOURSE,  CONDITIONAL  AND 
RESTRICTIVE  INDORSEMENT." 

62.  AN  rNDORSEMENT  WITHOUT  RECOURSE  — 
Means  that  the  indorser  exempts  himself  from  liability  to 
indemnify  the  holder  upon  the  dishonor  of  the  bill  or  note. 

63.  A  CONDITIONAL  INDORSEMENT  —  Means  an  in- 
dorsement by  •which  the  title  to  the  instrument  does  not 
pass  until  the  condition  mentioned  in  the  indorsement  is 
fulfilled. 

64.  A  RESTRICTIVE  INDORSEMENT— Means  that  the 
indorsee  is  deputed  by  the  indorser  to  be  his  agent  in  col- 
lecting the  bill  or  note,  or  else  that  the  title  is  vested  in 
the  indorsee  as  a  trustee  or  for  the  use  or  for  the  benefit 
of  a  third  person.  -C>y^ 

We  have  seen  that,  whether  an  indorser  makes  a  blank  or  a 
special  indorsement  upon  the  instrument,  he  both  incurs  a  liability 
as  an  indorser  thereon,  and  transfers  it.  This  is  true  of  indorse- 
ments generally,  whatever  be  their  form,  provided  the  intention  to 
be  bound  and  to  transfer  be  present.  If  these  can  be  construed 
from  its  form,  it  is  sufficient  to  make  the  writing  an  indorsement. 
For  example,  the  words,  "I  this  day  sold  and  delivered  to  C.  A. 
the  within  note,"  **  were  deemed  an  indorsement.  And  any 
form  of  words  consistent  with  the  tenor  of  the  main  instrument, 
and  showing  such  intention,  will  be  treated  by  the  courts  as  creat- 
ing the  contract. 

dorsement,  but  on  appeal  It  was  held  that  evidence  of  authority  was  wanting, 
and  that  the  law  would  not  infer  It  Watervliet  Bank  v.  White,  1  Denio,  COS; 
Pentz  V,  Winterbottom,  5  Denlo,  51. 

*8  "An  indorsement  may  be  either  special  or  in  blanlc;  and  It  may  also  he 
either  restrictive  or  qualified,  or  conditional."  Ne^.  lusL  L.  §  G.3.  Cf.  Id.  §  08, 
which  identifles  qualified  Indorsements  with  Indorsements  without  recourse. 

♦  4  ADAMS  v,  BLETHEN,  6G  Me.  19;  riuuca  v.  Ely,  4  McU-au,  173.  I'\^d. 
Ca.s.  No.  11. IC!).     Ante,  p.  lOt). 


120  INDORSKMENT.  (Ch.  4 

The  needs  of  commerce  have  created  special  forms  of  indorse- 
ment modifying  and  limiting  the  effect  of  this  contract,  without, 
in  many  instances,  destroying  the  negotiability  of  the  main  instru- 
ment For  example,  an  indorser  may  exempt  himself  from  lia- 
bility as  an  indorser  by  an  indorsement  without  recourse,  and  yet 
the  instrument  remain  negotiable.  He  may  perhaps,  by  a  con- 
ditional indorsement,  give  all  subsequent  parties  notice  that,  so  far 
as  he  is  concerned,  the  title  to  the  instrument  has  not  vested  in  his 
indorsee  and  subsequent  parties,  and  that  the  instrument  cannot 
be  safely  paid  to  the  holder  until  some  condition  written  upon  it 
is  fulfilled,  or  he  may  restrict  it  in  its  circulation;  or  he  may  make 
a  restrictive  indorsement.  The  reason  of  these  indorsements  is  to 
be  kept  carefully  in  mind  while  examining  them.  They  are  based 
upon  the  idea  that  the  right  of  property  in  the  lawful  owner  im- 
plies the  right,  not  merely  to  sell  it  outright,  but  also  to  make  such 
disposition  of  it  as  he  sees  fit. 

Indorsement  without  Hecourse. 

The  indorsement  without  recourse  is  in  form  of  words,  **Without 
recourse,"  or  "Sans  recourse,"  or  "At  the  indorsee's  own  risk,"  *' 
or  "I  hereby  indorse  and  transfer  my  right  and  interest  in  this  bill 
to  C  D,  or  order,  but  with  this  express  condition:  that  I  shall  not 
be  liable  to  him  or  to  any  subsequent  holder  for  the  acceptance  or 
payment  of  the  bill."  *®  Such  indorsements  throw  no  discredit  on 
the  bill.*^  Such  an  indorser  does  not  escape  from  the  effect  of  the 
warranties,  as  explained  hereafter.**  The  promisee  of  a  negotiable 
bill  or  note  indorses  it  to  a  third  person,  merely  stipulating  tluit. 
as  the  indorser,  he  is  not  to  be  responsible  if  the  acceptor  or  maker 

48  RICE  V.  STEARNS,  3  Mass.  225;  RICHARDSON  v.  LINCOLN,  5  Mete. 
(Mass.)  201;  Fitchburg  Bank  v.  Greenwood,  2  Allen  (Mass.)  434;  Welch  v. 
Lindo,  7  Cranch,  159;  Mott  v.  Hicks.  1  Cow.  513;  Craft  v.  Fleming,  46  Pa.  St. 
140;   STEVENSON  v.  O'NEAL,  71  111.  314;   Walter  v.  Kirk,  14  111.  55. 

*8  Chit.  Bills,  235.  As  against  his  Immediate  Indorsee,  an  indorser  may 
prove  a  collateral  agreement  that  the  indorsement  should  be  without  recourse. 
PIKE  v.  STREET,  1  Moody  &  M.  22G;  Davis  y.  Brown,  94  U.  S.  423;  2  Ames, 
Cas.  Bills  &  N.  836;  Rand.  Com.  Paper,  §  779. 

4T  LOMAX  V.  PICOT,  2  Rand,  (Va.)  260. 

48  Frazer  v.  D'Invilliers.  2  Pa.  St.  200;  HANNUM  v.  RICHARDSON,  48  Vt. 
508;  DUMONT  v.  WILLIAMSON,  18  Ohio  St  516;  CHALLISS  T.  McCRUM,  22 
Kan.  157. 


§§  62-64)  CONDITIONAL    INDORSEMENT.  121 

<ioes  not  pay  it.  This  he  may  do,  because  he  has  the  property  in 
the  bill  or  note,  and  he  may  dispose  of  it  on  what  terms  he  pleases. 
Such  an  indorsement  does  not  render  the  negotiajilr  firrnrity  no 
longernegotiable.*"  The  bill  or  note  remains  negotiable  i"  the 
handF  of  TheTnHorsee,  although  he  has  no  remedyngainst  the  Ln- 
dorsej'  without  recoufso.  And,  inlu  vvhubuilgn^s'soeYer  the  bill  or 
note  may  come,  the  maker  is  still  liable  according  to  the  terms  of 
his  original  contract.''"  The  question  with  the  courts  in  construing 
indorsements  without  recourse  is  whether  the  words  of  the  indorse- 
ment are  such  that  they  clearly  express  an  intention  on  the  part  of 
the  indorser  not  to  be  bound,  and  a  corresponding  intention  on  the 
part  of  the  immediate  subsequent  indorsees,  evidenced  by  their 
acceptance  of  the  instrument  with  such  an  indorsement,  to  exempt 
the  indorser  from  his  liability/^  The  presumption  is  rather  that 
the  usual  liability  of  an  indorser  is  intended  to  be  incurred.     And, 


to  overcome  this,  it  must  clearly  appear  tnat  the  transfer  of  the  in- 
strument was  only  to  transfer  the  title  to  it,  and  not  to  indemnify 
the  indorsee  against  loss  in  case  it  was  not  paid  by  the  acceptor  or 
maker.  *^ 

Conditional  Indorsement. 

The  conditional  indorsement  is  a  device  by  which  a  payee  or  an  in- 
dorsee may  part  with  the  possession  of  an  instrument,  but  not  with  the 
legal  title  to  it.  Mr.  Daniel  instances  "Pay  to  A  B,  or  order,  if  he  ar- 
rives at  21  years  of  age,"  or  "Pay  to  A  B,  or  order,  unless  before  pay- 
ment I  give  you  notice  to  the  contrary,"  as  examples  of  conditional  in- 
dorsements, the  former  being  an  indorsement  upon  a  condition  prece- 
dent, and  the  latter  one  upon  a  condition  subsequent."'  These  condi- 
tional indorsements  have  not  come  very  often  before  the  courts,  but 
they  are  recognized  as  a  distinct  class.  It  may  be  said,  by  way  of  criti- 
cism, that  in  them  commercial  convenience  has  overridden  the  strict 
theory  of  negotiability.     This  theory  would  not  permit  to  exist  a  con- 

49  RUSSELL  V.  BALL,  2  Johns.  (N.  Y.)  50;  BORDEN  v.  CLERK.  2G  Mich. 
410.     Post.  p.  124. 

00  RICE  V.  STEARNS,  3  Mass.  22.'). 

Bi  Fassin  v.  HTibbard,  55  N.  Y.  4(55. 

B2  Spe  N«'g.  Inst.  L.  §  G8,  which  declares  the  law  as  above  stated.  Cf.  |  74. 
See  ante,  p.  109. 

88  Daniel.   Nf-    Inst.  !?  HOT. 


122  INDORSEMENT.  (Ch.   4 

dition  which  charged  every  subsequent  indorsee  with  the  duty  of  seeing 
whether  the  condition  had  been  fulfilled  before  he  could  legally  own 
the  instrument.  For,  certainly,  with  the  conditional  indorsement,  a& 
well  as  with  the  conditional  bill  or  note,  it  would  be  a  most  effective 
restriction  to  circulation  as  a  medium  of  payment.  With  this  criti- 
cism in  mind,  it  is  well  to  note  the  authority  usually  referred  to  as  the 
leading  case  upon  the  subject,— ROBERTSON  v.  KENSINGTON." 
There  this  indorsement  was  made  upon  an  ordinary  draft:  'Tay  the 
within  sum  to  Messrs.  Clerk  &  Ross,  or  order,  upon  my  name  appear- 
ing in  the  'Gazette'  as  ensign  in  any  regiment  of  the  line,  between  the 
1st  and  64th,  if  within  two  months  from  this  date."  This  was  trans- 
ferred to  bona  fide  holders,  and  the  acceptors  paid  the  bill  on  its 
maturity  to  one  of  these.  In  the  meantime  the  indorser's  name  had 
never  appeared  in  the  Gazette  as  an  ensign,  and  he  brought  suit  as 
the  payee  of  the  bill  against  the  acceptors  who  had  accepted  the  bill 
after  this  indorsement  had  been  written  upon  it.  And  it  is  to  be  in- 
ferred from  the  report  of  the  case  that  the  court  decided  that  such  an 
indorsement  was  only  a  conditional  transfer  of  the  absolute  interest 
in  the  bill,  and,  its  condition  never  having  been  performed,  the  trans- 
fer was  defeated.  As  appears  from  the  cases,  the  point  emphasized 
is  that  the  condition  operates  as  notice,  and,  being  merely  a  notice,  it 
does  not  destroy  the  negotiability  of  the  bill  or  note.  Thus,  where  a 
note  in  usual  form  had  these  words  upon  it,  signed  by  the  makers, 
"The  within  obligation  is  to  be  delivered  to  the  payees  of  the  note 
as  a  consideration  for  a  judgment  which  was  to  be  assigned  to  the 
makers,"  "^^  the  court  properly  said  the  words  were  no  part  of  the 
note.  Their  effect  was  only  to  show  the  consideration,  and  to 
operate  as  a  notice  to  any  person  who  might  purchase  the  note. 
By  this  was  meant  that  it  was  the  intention  of  the  parties  that  it 
was  not  to  affect  the  original  contract.  And  in  cases  of  conditional 
indorsement,  when  it  is  not  the  intention  of  the  original  parties  that 
the  main  instrument  should  be  contingent,  the  act  of  the  conditional 
indorser  is  not  to  be  understood  as  operating  to  change  the  main 
instrument.  The  terms  of  the  face  of  the  instrument  still  remain  an 
absolute  negotiable  order  or  promise  of  payment  to  some  one.    That 

84  ROBERTSON  v.  KENSINGTON,  4  Taunt.  30. 

•6  Sanders  v.  Bacon,  8  Johns.  4&3;  Tappan  v.  Ely,  15  "Wend.  3G3. 


§§  62-64)  CONDITIONAL    INDORSEMENT.  125 

some  one  might  in  turn  negotiate  the  bill  or  note  to  some  one  else, 
who  in  his  turn  might  continue  his  negotiation  until  it  came  to  the 
conditional  indorser.  But  he,  on  parting  with  it,  having  the  right  of 
property  in  himself,  might  make  a  special  contract  which  would  be 
distinct  from  the  contract  embodied  on  the  face  of  the  instrument. 
And  the  only  purpose  and  result  of  this  contract  would  be  to  notify 
every  holder  subsequent  to  himself,  and  the  maker  or  acceptor, 
when  the  time  for  the  payment  of  the  instrument  arrived,  that  he 
as  an  indorser  parted  with  the  instrument  upon  the  understanding 
that  his  ownership  of  it  was  not  to  cease  until  some  stated  condi- 
tion was  fulfilled.  As  between  the  immediate  indorser  and 
indorsee,  there  can  be  little  doubt  that  this  is  a  correct  and  proper 
rule.  As  to  them  the  contract  of  indorsement  is  but  an  ordinary 
contract,  open  to  all  objections  and  defenses  to  which  other  con- 
tracts are  open.  Some  of  these  objections  and  defenses  may  even 
be  shown  by  parol  evidence.'^®  This  is  because  the  contract  con- 
sists partly  of  the  written  indorsement,  partly  of  the  act  of  delivery 
of  the  bill  to  the  indorsee,  and  partly  of  the  mutual  intention  with 
which  the  delivery  is  made  by  the  indorser  and  received  by  the  in- 
dorsee.'*'' But  when  the  question  is  not  one  between  the  immediate 
indorser  and  indorsee,  but  between  that  indorser  or  indorsee  and 
third  parties  holding  in  good  faith  and  for  value,  it  becomes  much 
more  embarrassing.  It  is  clear  that  parol  evidence  or  evidence  of 
intention  cannot  be  allowed  to  ingraft  a  condition  upon  the  instru- 
ment such  that  it  will  affect  third  parties.''^  But  where  the  indorse- 
ment is  in  writing,  the  rule  is  so  far  settled  that  the  maker  or  ac- 
ceptor and  probably  prior  parties  are  bound  to  take  notice  of  the 
title  of  the  indorsee,  and,  having  such  notice,  they  pay  the  instru- 
ment to  him  or  to  subsequent  parties  at  the  risk  of  repayment  to 
the  conditional  indorser,  if  the  condition  is  unfulfilled.'^®     But,  on 

88  Bookstaver  v.  Jayne,  60  N.  Y.  14G;  Sawyer  v.  Chambers,  44  Barb.  42. 
See  Dauiel,  Neg.  Inst.  §§  717,  723,  as  to  classification  of  defenses  wliicli  may 
be  shown  by  parol  evidence.  BENEDICT  v.  COWDEN,  49  N.  Y.  39G;  HART- 
LEY V.  WILKINSON,  4  Maule  &  S.  2.^);  Cbolmeley  v.  Darloy,  14  Mees.  &  W. 
343;   Leeds  v.  Lancashire,  2  Camp.  20.">. 

6T  Bruce  v.  Wright,  3  Hun  (N.  Y.)  548;  BENTON  v.  MARTIN,  .^>2  N.  Y.  570; 
Brcntiss  v.  Graves.  33  Barb.  021;    Ocean  Banlc  v.  Dill.  3<J  Barb.  577. 

68  Byles,  Bills,  p.  155;  WiUse  v.  Whitaker,  22  Hun.  242. 

6»  ItOBERTSON  V.  KENSINGTON,  4  Taunt  30;  Savage  v.  Aldreu,  2  SlurklCr 


.134  INDORSEMENT.  (Ch.   4 

the  other  hand,  thej;oDditioDal  indorser  cannot  restrict  thenego- 
tiability  of  the  instrument  and  prevent  its  further^ jndorsemenTlBn^ 
hisJndoEsee.'"  The  terms  of  the  original  instrument  making  it  ne- 
gotiable prevail,  and  persons  other  tHaiTThe  conditional ^n^oFsee 
may  take  it  subject  to  the  notice  of  the  condition.  And  though 
there  is  little,  if  any,  authority  upon  the  poittt^-stiH*  it  may  be  as- 
sumed that  in  the  absence  of  an  express  warranty  no  other  than  a 
conditional  warranty  of  title  in  the  subsequent  indorser  would  be 
implied.®^  There  seems  to  be  no  reason  why  the  other  implied  war- 
ranties should  not  remain  a  part  of  the  contract.  But  the  notice  of 
a  conditional  title  with  which  the  subsequent  purchaser  of  the  in- 
strument would  be  charged  would  seem  to  expressly  except  war- 
ranty of  title  from  the  obligations  of  the  indorser. 

RestHctive  Indorsement. 

The  last  of  these  peculiar  classes  of  indorsements  originating  in 
the  needs  of  commerce  is  the  restrictive  indorsement.  It  is  of  two 
kinds.*^  The  first  and  commonest  variety,  and  the  one  which  is 
generally  spoken  of  by  the  text  writers  as  the  restrictive  indorse- 
ment,  is   tlinf  ^RThprP  fbp  hnlflpr   flppiitpa   fp   ^omp.   othpr   pprgnnthp 

232.  "Where  an  Indorsement  Is  conditional,  a  party  required  to  pay  the  instru- 
ment may  disregard  the  condition,  and  malie  payment  to  the  indorsee  or  his 
transferee,  whether  the  condition  has  been  fulfilled  or  not.  But  any  person  to 
whom  an  Instrument  so  indorsed  is  negotiated  will  hold  the  same,  or  the  pro- 
ceeds thereof,  subject  to  the  rights  of  the  person  Indorsing  conditionally." 
Neg.  Inst.  L.  §  69.     This  section  alters  the  law.     See  HufCcut,  Neg.  Inst.  24. 

60  Scares  v.  Glyn,  8  Q.  B.  24;  s.  c.  14  L.  J.  Q.  B.  313. 

ei  Mandevllle  v.  Newton,  119  N.  Y.  10,  23  N,  E.  920. 

«2  "An  indorsement  is  restrictive  which  either  (1)  prohibits  the  further 
negotiation  of  the  instrument;  or  (2)  constitutes  the  indorsee  the  agent  of 
the  indorser;  or  (3)  vests  the  title  in  the  indorsee  in  trust  for  or  to  the  use  of 
some  other  person.  But  the  mere  absence  of  words  implying  power  to  nego- 
tiate does  not  make  an  Indorsement  restrictive."  Neg.  Inst.  L.  §  66.  The 
first  and  second  subdivisions  cover  the  first  class  of  Indorsements  discussed 
in  this  paragraph,  the  third  subdivision  the  second  class.  "A  restrictive  in- 
dorsement confers  upon  the  indorsee  the  right  (1)  to  receive  payment  of  the 
instrument;  (2)  to  bring  any  action  thereon  that  the  indorser  could  bring;  (3) 
\Q  transfer  his  rights  as  such  indorsee,  where  the  form  of  the  indorsement 
authorizes  him  to  do  so.  But  all  subsequent  Indorsees  acquire  only  the  title 
of  the  first  indorsee  under  the  restrictive  Indorsement."  Id.  §  67.  This  sec- 
tion declares  the  law  substantially  as  stated  in  this  paragraph. 


§§  62-64)  BESTRICTIVE    INDORSEMENT.  125 

businessofcolIectiDg  the  bill ;  the-otiier  jchprp  theJinldgrLJlit^nrspa 
the  instrument  to  one  person  for  the  use  or  benefit  of,  or  ns  the  frnn- 
tee  of,  another.  Upon  an  indorsement  of  the  first  kind  the  instru- 
went  is  no~Tonger  ^egotiable]^  the  second  variety  of  indorse_aiiiDt 
dceS~not7^however,  restrict  its  circulation.  Examples  of  the  first 
species  of  indorsement  are  indorsements  "J'or  collection,"  ®^  the  in- 
dorsement for  collection  meaning  that  the  holder  takes  no  title  to  it 
and  can  transfer  none,  but  can  merely  present  it  and  receive  the 
money  upon  it.'*  In  construing  these  and  other  cases  like  them,  such 
as  "Pay  to  A  only,"  ®^  or  "Pay  to  A  for  my  use,"  ®®  or  "Pay  to  A  for 
me,"  ®^  or  "Pay  to  my  steward  and  no  other  person,"  or  "Pay  to  my 
servant  for  my  use,"**  the  courts  have  been  governed  by  two  prin- 
ciples. The  first  and  most  important  is  the  reason  that  the  natural 
construction  of  such  a  form  of  w^ords  is  that  it  implies  a  mere  au- 
thority to  receive  the  money  called  for  in  the  instrument  for  the  use 
of  the  indorser  himself,  or  according  to  his  directions.  It  therefore 
vests  a  mere  agency  in  the  indorsee,  and  shows  that  he,  at  least,  did 
not  give  a  valuable  consideration  for  the  bill  or  note  and  is  not 
therefore  its  absolute  owner.  It  follows  from  this  that  the  restrict- 
ive indorser,  in  creating  such  an  agency,  did  not  intend  to  pass  the 
title  to  the  indorsee,  but  rather  to  retain  it  in  himself.  And  hence, 
there  being  no  intention  to  transfer,  the  instrument  cannot  be  ne- 
gotiated through  the  indorsement.®"     The  second  is  the  reason  thf  t 

68  National  City  Bank  of  Broolilyn  v.  Westcott,  118  N.  Y.  4G8,  23  N.  E.  900; 
Rand.  Com.  Paper,  §  72G.  It  is  generally  held,  however,  that  indorsement 
"for  deposit"  passes  title.  National  Com.  Bank  v.  Miller,  77  Ala.  168;  Wasson 
V.  Lamb,  120  Ind.  514,  22  N.  E.  729;  Security  Bank  v.  Fuel  Co.,  58  Minn.  141, 
59  N.  W.  987.     Beal  v.  City  of  Somerville,  1  C.  C.  A.  598.  50  Fed.  647,  contra. 

84  SIGOURNEY  V.  LLOYD,  8  Barn.  &  C.  622;  LLOYD  v.  SIGOURXEY,  5 
Bing.  525;  WHITE  v.  BANK,  102  U.  S.  658.  The  indorsee  "for  collection" 
may  bring  suit  in  his  own  name.  Boyd  v.  Corbitt,  37  Mich.  52;  Wilson  v. 
Tolson,  79  Ga.  137,  3  S.  E.  900;  Rand.  Com.  Taper,  §  726.  Rock  County  Nat. 
Bank  v.  Hollister,  21  Minn.  385  (under  statute  requiring  action  to  be  prosecuted 
in  name  of  real  party  in  interest),  contra.  Soo  CO:MMEnCTAL  BANK  v.  ARM- 
STRONG, 148  U.  S.  50,  13  Sup.  Ct.  53a 

88  rOWER  V.  FINNIE,  4  Call  (Va.)  411. 

«8  LLOYD  V.  SIGOURNEY,  5  Bing.  525. 

«T  Williams  v.  Potter,  72  Ind.  35^1. 

•  8  EDIE  V.  EA.ST  LNDIA  CO.,  2  BurrowB,  1221, 

•B  UOOK  V.  PRATT,  78  N.  Y.  371, 


126  INDORSEMENT.  (Cll.   4 

the  restrictive  indorsement,  like  the  conditional  indorsement,  oper- 
ates as  notice  both  to  the  persons  called  upon  to  pay  the  instru- 
ment and  those  who  might  acquire  it  after  the  indorsement  as  pur- 
chasers. No  subsequent  purchaser  could  take  the  instrument  in 
good  faith,  because  whoever  reads  the  indorsement,  as  it  would  be 
every  purchaser's  legal  duty  to  read  it,  must  see  that  its  operation 
was  limited.  Such  a  purchaser  must  see  that  the  object  of  the  in- 
dorser  was  to  prevent  the  money  received  from  being  applied  to  the 
use  of  any  other  person  than  himself.  And  therefore,  to  whomso- 
ever the  money  might  be  paid,  it  would  be  paid  in  trust  for  the 
indorser,  and  wheresoever  the  instrument  traveled  it  carried  that 
trust  on  the  face  of  if^  But  there  is  a  class  of  so-called  restrictive 
indorsements  which  has  a  very  different  construction  at  the  hands 
of  the  courts.  The  words  in  which  these  indorsements  are  framed 
are  such  as  "Pay  to  A  or  order  for  the  use  of  B,"  ^^  and  "Pay  to  the 
order  of  A  for  the  benefit  of  B."  ^^     The  meaning  of  these  words  is 

70  LLOYD  V.  SIGOURXEY,  5  Bing.  .525.  In  this  case  the  indorsement  was 
to  this  effect:  "Pay  to  S.  W.,  or  order,  for  my  use.  Henry  Sigourney."  It 
was  held  that  such  indorsement  was  restrictive,  and  was  sufficient  to  put  a 
purchaser  of  such  bill  upon  inquiry,  since  it  indicates  that  the  holder  is 
simply  acting  as  the  agent  for  the  one  for  whose  use  he  is  holding.  AXCHER 
V.  BANK  OF  ENGLAND.  2  Doug.  037. 

71  EVANS  V.  CRAMLINGTON,  Garth.  5,  affirmed  In  the  exchequer  cham- 
ber. 2  Vent.  309. 

7  2  HOOK  V.  PRATT,  78  N.  Y.  371.  In  this  case  the  payee,  who  was  also 
drawer,  of  a  draft  indorsed  it  to  the  order  of  Mrs.  Mary  Hook  "for  the  benefit 
of  her  son  Charlie."  In  an  action  by  her,  as  trustee  of  her  son,  against  the 
executors  of  the  drawer,  it  was  held  that  she  could  maintain  the  action.  Rapal- 
lo,  J.,  said:  "She  was  constituted  trustee  of  her  son,  and  held  the  legal 
title.  The  indorsement  gave  notice  of  the  trust,  so  that,  if  she  had  passed 
it  off  for  her  own  debt,  or  in  any  other  manner  indicating  that  the  transfer 
was  in  violation  of  the  trust,  her  transferee  would  take  it  subject  to  the  trust, 
but  there  was  nothing  reserved  to  the  drawer  and  indorser.  *  ♦  •  The 
presumption  is  that  the  draft  was  drawn  and  indorsed  by  him  for  a  consid- 
eration received  either  from  the  indorsee  or  the  beneficiary."  See  ante,  p.  74. 
In  TREUTTEL  v.  BARANT)ON,  8  Taunt.  100,  the  indorsement  was  in  form 
"Pay  to  A  or  order  for  account  of  B"  (a  third  person).  This  would  seem  to 
transfer  the  legal  title  to  A  in  trust  for  B,  yet  it  was  held  that  B  could  main- 
tain trover  for  the  value  of  the  bill  against  one  with  whom  A  had  deposited 
it  for  cash  advances.  This  bill  was  properly  negotiable,  like  the  draft  in 
HOOK  y.  PRATT,  subject  to  the  trust     "The  plaintiff,  who  was  cestui  que 


|§  62-64)  RESTRICTIVE   INDORSEMENT.  127 

cleclared  to  be  that  on  making  such  an  indorsement  the  indorser  in- 
tended to  part  with  his  whole  title  to  the  instrument.  At  least 
there  is  nothing  in  the  words  themselves  to  negative  such  a  pre- 
sumption. And  it  perhaps  is  the  case,  though  it  is  not  so  expressly 
stated,  that,  unless  there  was  some  expression  negativing  this  idea, 
the  words  "or  order,"  taken  with  the  fact  of  the  indorsement  itself, 
would  be  an  evidence  of  intendment  to  part  with  the  titlv..  How- 
ever this  may  be,  the  courts  have  declared  the  meaning  of  the  words 
"for  the  use''  and  ''for  the  benefit"  to  mean  that  the  indorser  vested 
the  indorsee  with  the  title  of  the  bill,  not  for  the  benefit  of  the  in- 
dorser, but  for  the  benefit  of  some  one  else.  So  that  the  indorsee 
was  a  trustee  for  that  other  person,  and  could  not  pass  off  the  bill 
for  his  own  debt.  For  this  reason  the  indorsement  must  be  pre- 
sumed to  have  been  made  upon  a  consideration.  And  being  thus  a 
transfer,  with  its  operation  limited  to  the  right  of  the  indorsee  to 
apply  its  proceeds  to  the  benefit  of  some  person  other  than  himself, 
the  instrument  could  in  turn  be  transferred,  and  so  the  paper  con- 
tinued negotiable.  And  because  it  was  negotiable  it  was  a  pledge  of 
the  credit  of  the  restrictive  indorser.  It  is  settled  that  an  indorse- 
ment "Pay  to  A"  does  not  restrict  the  negotiation  of  the  instru- 
ment, because  the  intention  of  the  original  parties  to  make  the  in- 
strument negotiable  prevails  over  the  absence  of  words  of  nego- 
tiability in  the  indorsement^'  And  for  the  same  reason,  with  these 
forms  of  words  the  instrument  should  continue  negotiable  unless  it 
expressly  appears  from  the  contract  between  the  indorser  and  in- 
dorsee that  the  indorser  intended  to  absolve  himself  from  liability 
as  an  indorser  and  to  destroy  the  effect  of  the  general  rule  that  the 
indorsee,  having  possession  of  the  instrument,  was  its  owner.''* 

trust,  seems  clearly  to  have  misconceived  his  action  in  bringing  trover  against 
his  trustee;  but  the  point  was  not  taken."    2  Ames,  Cas.  Bills  &  N.  837. 

73  EDIE  V.  EAST  INDIA  CO.,  1  W.  Bl.  295,  2  Burrows,  1210;  MOKE  v. 
MANNING,  Comyn,  311;   LEAVirr  v.  PUTNAM,  3  N.  Y.  494.     Ante.     f>-  IKi- 

7*  While  these  views  seem  soimd,  it  must  be  admitted  that  the  distinction 
between  these  two  classes  of  restrictive  indorsements  Is  not  always  dearly 
recognized  by  the  text-books.  See  Daniel,  Neg.  Inst.  §§  G9S,  G99;  Edw.  Bills 
&  N.  §  :'>95;  Tied.  Com.  Paper,  §  2G8;  Band.  Com.  Paper,  §8  724-727.  But 
Eee  2  Ames.  Bills  &  N.  p.  837. 


128  INDORSEMENT.  (Ch.  4 


NATURE  OF  INDORSEMENT. 

65,  The  nature    of  an  indorsement  is  as  foUo^ws:  It  is 

(a)  A  contract  "w^hich   the   indorser  assumes   -with 

his  indorsee  and  subsequent  holders  that,  if 
the  dra-wree,  acceptor,  or  maker  fails  to  honor 
the  bill  or  note,  he  -will,  upon  the  perform- 
ance of  certain  conditions  imposed  by  the 
law  merchant,  indemnify  the  holder  for  all 
loss  incurred  by  reason  of  the  dishonor  of 
the  bill  or  note. 

(b)  A  transfer  of  the  title  to  the  instrument." 

Perliaps  the  most  Important  aspect  of  the  indorsement  is  that 
it  is  a  distinct  contract  It  gives  it  all  the  effect  of  a  new  instru- 
ment as  against  the  indorser,  though  it  does  not  in  fact  create  a 
new  instrument.  Every  indorser  of  a  bill  is  a  new  drawpr^  nnd  it  is  r 
part  of  thejnherent  property  of  the  original^  instrument  that  an  in- 
dorsement operates  as  against  the  indorser  in  the  nature  oi  a  new 
^"drawing  of  the  bill  by  him  J*  The  first  legal  fact  of  the  theory  with 
^hlch  the  student  should  familiarize  himself  is  that,  from  the  form 
of  words  which  we  have  already  given  as  common  methods  of  in- 
dorsement, the  courts  have  created  a  peculiar  class  of  rights  and 
liabilities.  The  main  terms  of  the  contract  are  found  on  the  face  of 
the  bill  or  note.  In  the  illustrations  under  §§  12  and  13,  for 
example,  the  main  terms  were  an  order  or  promise  to  pay  at  a 
given  time  and  place  a  certain  sum  of  money,  either  to  some  speci- 
fied person  or  to  such  person  as  he  might  direct.  The  indorser  in 
his  contract  adopts  and  ratifies  each  of  these  terms,  and  makes  them 
the  main  terms  of  his  own  contract.  This  idea  will  perhaps  be 
made  more  clear  by  saying  that  if,  in  the  illustration  under  §  13, 
John  Smith  had  indorsed  the  note:  "Pay  to  John  Jones.  [Signed] 
John  Smith," — John  Jones  could  negotiate  it  further,  despite  the 
Indorsement  was  not  in  the  negotiable  form  of  "Pay  to  Jones,  or 

T8  2  Ames,  Bills  &  N.  p.  837. 

»6  PENNY  V.  INNES,  1  Cromp.,  M.  &  R.  439;   McCamant  T.  Miners'  Trust 
Co.  Bank,  15  Wkly.  Notes  Cas.  (Pa.)  122. 


§  65)  NATURE   OF  INDORSEMENT.  129 

order.**  This  is  because,  by  the  terms  on  the  face  of  the  instru- 
ment, the  maker,  Thomas  Robinson,  had  promised  to  pay  "to  order." 
This  means  that  he  had  put  into  circulation  a  promise  to  pay  money 
not  only  to  John  Smith,  but  to  any  one  who  might  legally  hold  the 
instrument  And,  except  in  case  of  John  Smith's  mfll^in^  a  rpstrjft- 
ive  indorsement  to  an  agent  without  intention  on  his  part  to  trans- 
fer  title,  the  indorsement  of  John  Smith  wnnld  be  construed  only 
as  an  adoption  of  the  promise  of  Thomas  Robinson,  which  was  that 
thTnote^ight  pass  from_hand  to  band  ad  infinitum,  until  Robinspn 
pald^it^'^ 

But  theie  is  more  embodied  in  the  contract  of  the  indorser  than 
the  terms  which  are  found  in  the  face  of  the  instrument.  And  these 
are  the  terms  which  ar^  implied  in  and  made  a  part  of  the  contract 
by  the  law.  As  we  have  seen,  a  part  of  the  contract  of  the  in- 
dorser is  that  it  is  a  contract  of  indemnity.''*  The  right  to  this 
indemnity  accraes  only  upon  the  fulfillment  of  certain  conditions 
which  are  conditiOiiu  precedent  to  its  enforcement.'"  It  is  not,  like 
the  guaranty  uf  payment,  foi-  instance,  payable  absolutely,  primarily, 
and  forthwith.  The  indorser  is  in  law  a  new  drawer  of  the  bill  and 
a  new  maker  oi'  the  note.*"  In  either  instance  with  reference  to 
his  indorsee  he  sLands  precisely  in  the  position  of  the  drawer  of  the 
bill  or  the  maker  of  the  note.  If  the  instrument  be  a  bill  he  may 
be  supposed  to  havf  assets  in  the  hands  of  the  drawee  and  to  give 
the  indorse€'  an  order  for  the  payment  of  them.     In  the  case  of  a 

TT  LEAVITl^  V.  PUTNAM,  S  N.  Y.  494;  EDIE  v.  EAST  INDIA  CO.,  1  W. 
Bl.  295,  2  Burrows,  1216i* 

T8  Byles,  Bills,  p.  154;   Edw.  Neg.  Inst.  §  384;   Story,  Prom.  Notes.  §  135. 

T»  MUSSON  V.  LAKE.  4  How.  (U.  S.)  262;  Cuyler  v.  Stevens.  4  Wend.  566; 
Cayuga  Co.  Bank  v.  Warden,  1  N,  Y.  413. 

«o  AYMAR  V.  SHELDON,  12  Wend.  (N.  Y.)  439.  In  this  case  the  following 
was  held:  No  principle  seems  more  fully  settled  or  better  understood  In  com- 
mercial law,  than  that  the  contract  of  the  Indorser  is  a  new  and  Independent 
contract,  and  that  the  extent  of  his  obligations  Is  determined  by  It.  The 
transfer  by  Indorsement  Is  equivalent  In  effect  to  the  drawing  of  the  bill.  In 
GWINNEI.L  V.  HERBERT  a  distinction  is  drawn  between  a  bill  and  n  note, 
to  the  effect  that  on  a  bill  each  Indorser  Is  a  new  drawer,  but  the  drawer  Is 
liable  only  on  default  of  the  acceptor,  while  the  maker  of  a  note  Is  Ualilc  in 
the  first  Instance.  So,  If  each  Indorser  became  a  maker,  he  also  wouiti  lie 
liable  primarily.  5  Adol.  &  E.  436.  Holbrook  t.  Vibbard,  2  Scum.  (111.)  46r>; 
Belford  v.  Bangs.  15  111.  App.  76. 
NEG.BILLS.-8 


130  INDORSEMENT.  (Ch.   4 

note  the  considerations  existing  between  the  payee  and  the  maker 
may  be  supposed  to  exist  between  him  and  his  indorsee.  But  he 
does  not  by  his  contract  assume  liability  affecting  his  general  funds 
until  the  consideration  existing  between  the  original  parties  shall 
have  failed.  By  this  is  to  be  understood  that  by  the  mere  non- 
payment of  the  instrument  in  the  first  instance  the  indorser  breaks 
no  contract,  because  his  contract  is  separate  and  apart  from  that  of 
the  original  parties.®^  The  contract  which  the  law  puts  into  hi^ 
mouth  when  he  writes  his  name  on^the  back  of  the  instrument  is  pay- 
ment on  his  part  according  to  the  terms  of  the  ori,o:inal  instrnmentT 
with"  the  added^^nditions  of  due  presentment,  dishonor,  and  notice 
of  dishonor.  His  contract  therefore  is  that  his  general  funds  are 
liable  according  to  the  original  terms  of  the  instrument  and  indem- 
nity for  their  breach,  provided  there  have  been  due  and  proper  pre- 
sentment, dishonor,  and  notice  of  dishonor  by  the  holder.** 

As  a  Transfer. 

The  last  general  element  of  an  indorsement  is  that  it  is  a  transfer 
of  the  title  to  the  instrument.*^  It  is  sufficient  here  to  say,  in  gen- 
eral terms,  that  by  this  is  meant  nothing  more  than  that  it  is  a  mere 
purchase  and  sale  of  a  piece  of  property.  The  indorser  or  transfer- 
rer is  viewed  in  many  respects  as  a  vendor,  an^  the  indorsee  or 
transferee  as  a  vendee.  It  is,  of  course,  not  tangible  property,  but 
a  chose  in  action,  and  as  such  transferee  or  vendee  the  indorsee 
merely  purchases  the  rights  of  the  indorser.     What  these  are,  and 

«i  In  ROTHSCHILD  v.  CURRIE,  It  was  held  that  the  Indorser  contracts  to 
pay  not  primarily  or  absolutely,  but  on  two  conditions:  dishonor  by  drawee 
or  acceptor;  and  due  notification  to  himself  of  such  dishonor.  Being  in  law 
a  new  drawer  of  the  bill,  the  same  state  of  things  is  supposed  to  exist  between 
him  and  the  indorsee,  as  the  law  supposes  betn'een  the  drawer  and  paj'ee. 
1  Q.  B.  43.  In  MATTHEWS  v.  BLOXSOME,  33  Law  J.  209,  the  defendant, 
intending  to  become  surety  for  A,  put  his  name  at  the  back  of  a  blanli  bill 
stamp.  The  bill  was  then  filled  up  by  plaintiffs  as  drawers,  payable  to  their 
own  order.  As  he  gave  authority  to  fill  out  the  bill,  the  defendant  was  in 
the  same  position  as  an  indorser  after  the  bill  had  been  drawn,  and  might  be 
treated  as  a  new  drawer.    33  Law  J.  Q.  B.  209. 

8  2  MT.  MANSFIELD  HOTEL  CO.  v.  BAILEY,  64  Vt.  151,  24  Atl.  136;  Id.. 
Johns.  Gas.  Bills  &  N.  109;  May  v.  Coffin,  4  Mass.  341;  Warder  y.  Tucker,  7 
Mass.  449;    Bryant  v.  Faries,  15  IlL  App.  414. 

83  See  Neg.  Inst  L.  §  60. 


%  66)  REQUISITES    OF    INDORSEMENT.  131 

the  legal  relation  of  the  indorsee  to  the  various  parties  to  the  instru- 
ment, will  be  considered  hereafter. 


REQUISITES  OF  INDORSEMENT. 

66.  TLe  requisites  of  an  indorsement  are  as  foUo-ws: 

(a)  It  must  follow  the  tenor  of  the  bill  or  note. 

(b)  It  must  be  by  the  payee  or  a  subsequent  holder, 

(c)  It  is  only  complete  upon  delivery. 

FoUounng  Tenor  of  Instrument. 

The  tenor  of  a  bill  or  note  has  already  been  explained,  under  § 
43.  The  same  reasons  require  that  the  indorsement  follow  the 
tenor  of  the  original  instrument  that  require  that  the  acceptance 
follow  it.  The  indorser,  as  well  as  the  acceptor,  may  not  alter  the 
amount  of  money  **  obligated  in  the  instrument  to  be  paid,  nor  the 
time,®°  place,  or  manner  of  payment.  If,  for  instance,  the  indorser 
ordered  payment  of  part  of  the  sum  called  for  in  the  original  in- 
strument to  one  person,  and  part  to  another,  it  would  amount  to  an 
apportionment  of  the  contract,  and  the  acceptor  or  maker  would 
thus,  by  the  indorser's  act,  be  liable  to  two  actions  where,  by  the 
terms  of  the  original  contract,  he  was  liable  to  but  one.^*  Were 
the  rule  otherwise,  the  indorser  would  be  empowered  to  make  a  con- 
tract for  the  maker  or  acceptor  without  his  assent, — a  reductio  ad 
absurdum.  But  this  does  not  mean  that,  when  an  instrument  has 
been  paid  in  part,  a  receipt  for  the  amount  paid  may  not  be  written 

84  HAWKINS  V.  CARDY,  1  Ld.  Raym.  360.  In  this  case  It  was  shown  that 
Cardy  drew  a  bill  for  £46.  19s.,  payable  to  B  or  order,  and  that  B  indorsed 
£43.  4s.  of  It  payable  to  plaintiff.  It  was  held  by  the  court  that  the  note  was 
such  a  personal  contract  as  not  to  be  capable  of  apportionment.  Planters' 
Bank  of  Tennessee  v.  Evans,  36  Tex.  592. 

8  8  In  SMALLWOOD  v.  VERNON,  1  Strange,  478,  it  was  held  that  an  In- 
dorser might  charge  himself  to  pay  at  a  different  time  from  that  spofilied  in 
the  note,  though  he  could  not  lay  a  charge  upon  the  maker  of  a  note,  dinVrlng 
from  the  terms  of  such  note.  If  a  note  were  payable  May  1st  and  It  wa» 
Indorsed  payable  April  1st,  this  would  make  It  a  promissory  note  payable, 
as  to  the  indorser,  April  Ist 

•  «  Douglass  V.  Wilkeson,  6  Wend.  637;  HUGHES  v.  KIDDELL,  2  Bay  (S 
G.)  324.     See  Neg.  InsL  L.  {  62. 


132  INDORSEMENT.  (Ch.  4 

on  its  back,  and  the  indorser  may  not  transfer  the  balance,*^  nor 
that  a  note  may  not  be  transferred  to  two  or  more  persons,  vfho 
hold  it  in  co-ownership  as  a  joint  right,'*  nor  that  an  instrument 
may  not  be  indorsed  to  a  third  person  as  collateral  security  for  a 
«;laim  equaling  but  part  of  the  amount  called  for  in  the  instrument 
itself,®*  All  these  are  perfectly  proper  courses,  because  they  trans- 
fer but  one  right  of  action.  The  test  iSj_does_the  transfer  cut  jip 
thP_rioj2t  nf  nptinn^  nr  vary  it,^ OF  invest  different  persons  with  dif- 
ferent rights  of  action  against  different  paj!tieg_toJhe  instrument?  If 
it  does,  the  indorsement  is  void  as  such. 

It  is  sometimes  argued  that  a  writing  on  the  back  of  the  instru- 
ment, in  the  form  of  words  of  a  guaranty,  corresponds  to  and  fol- 
lows the  tenor  and  purpose  of  the  instrument,  and  tliat  for  this  rea- 
son it  is  a  form  of  indorsement.  But  the  better  opinion  is  that  its 
legal  effect  is  what  it  purports  to  be, — a  form  of  a  special  contract. 
A  guaranty  in  general  terms,  such  as  'T  warrant  the  collection  of  the 
within  note,  for  value  received,"  is  not  an  indorsement.®'*  Whether 
a  guaranty  on  a  negotiable  bill  or  note  is  itself  negotiable  is  a  ques- 
tion concerning  which  there  is  much  confusion,"^  On  the  one  hand 
it  is  held  by  some  cases  that  the  guaranty  does  not  fall  within  the 
rule  of  negotiability,  and  can  inure  only  to  the  benefit  of  the  person 
to  whom  it  was  given,'*  On  the  other  hand  it  is  held  in  some  ju- 
risdictions that  the  guaranty  passes  with  the  instrument,  and  inures 
to  the  benefit  of  the  holder,®'  In  this  view,  in  states  where  choses 
in  action  are  assignable,  and  an  action  must  be  brought  by  the  real 
party  in  interest,  suit  may  be  brought  by  the  holder  upon  the  guar- 
anty in  his  own  name."*  But,  even  where  the  latter  rule  prevails,  it 
cannot   be    said   that    the    guaranty   is   strictly    "negotiable,"    inas- 

•T  Douglass  V.  Wilkeson,  6  Wend.  (N.  Y.)  G37. 

8  8  FLINT  V.  FLINT,  6  Allen  (Mass.)  36;    CXDNOVER  y.  EARL,  26  Iowa,  167. 

89  Reid  V.  Furnival,  5  Car.  &  P.  499. 

8  0  Ante,  p.  109. 

81  Daniel,  Neg.  Inst.  §§  1774-1778;   Rand.  Com.  Paper,  §§  8G0,  861. 

82  TRUE  V.  FULLER,  21  Pick.  (Mass.)  140;  Tinker  v.  McCauley,  3  Mich. 
188;  McDoal  v.  Yeomans,  8  Watts  (Pa.)  361;  Irish  v.  Cutter,  31  Me.  536;  Hay- 
den  V.  Weldon,  43  N.  J.  Law,  128.     See  Pars.  Notes  &  B.  133,  134. 

8  8  Webster  v.  Cobb,  17  111.  466;  Phelps  v.  Church,  65  Mich.  232,  32  N.  W. 
30;    Story,  Bills,  §  458. 

•«  COOPER  v.  DEDRICK.  22  Barb.  (N.  Y.)  516;   Cole  v.  Bank,  60  Ind.  350; 


I  66)  REQUISITES    OF   INDORSEMENT,  133 

much  as  only  the  rights  of  the  party  to  whom  the  guaranty  was 
given  can  pass  to  subsequent  holders,  and  it  would  still  be  subject 
to  defenses  existing  between  the  original  parties." 

Who  may  Indorse. 

The  requisite  of  an  indorsement  next  in  importance  to  its  being 
iiccording  to  the  tenor  of  the  instrument  is  that  it  be  by  the  payee  or 
a  subsequent  holder."  The  sense  of  this  rule  is,  however,  restrict- 
ed. As  we  shall  see  in  the  next  section,  a  person  who  is  not  a 
holder  or  owner  of  the  instrument  in  any  sense,  but  who  puts  his 
name  upon  it  merely  to  support  its  circulation  by  his  credit,  may 
incur  liability  as  a  so-called  "irregular  indorser."  All  that  we 
would  here  say  is  that  in  case  of  instruments  payable  to  or- 
4er  the  payee  must  be   in   the    first    instance    the  first  indorser.'^ 

Harbord  v.  Cooper,  43  Minn.  466,  45  N.  W.  860;  Phelps  v.  Sargent,  69  Minn. 
118,  71  N.  W.  927. 

SB  Gallagher  v.  White,  31  Barb.  (N.  Y.)  92;  Omaha  Nat.  Bank  v.  Walker 
(C.  G.)  5  Fed.  399;  BARLOW  v.  MYERS.  64  N.  Y.  41;  2  Ames,  Cas.  Bills  & 
N.  225,  note  1;  Rand.  Com.  Paper,  §  861.  See  CENTRAL  TRUST  GO.  v. 
BANK,  101  U.  S.  70.     Webster  v.  Oobb,  17  111.  466,  contra. 

88  An  apparent  exception  exists  in  the  ease  of  an  instrument  drawn  or 
indorsed  to  the  order  of  a  person  as  "cashier"  of  a  bank,  and  perhaps  as 
other  managing  officer  of  a  corporation.  Ante.  p.  66.  note  77.  In  such  case  flther 
the  bank  or  corporation  or  the  officer  may  indorse.  First  Nat.  Bank  v.  Hall, 
44  N.  Y.  395;  FOLGER  v.  CHASE,  18  Pick.  (Mass.)  63;  Baldwin  v.  Bank,  1 
Wall.  239.  See  Neg.  Inst.  L.  §  72,  which  makes  the  rule  applicable  to 
a  "cashier  or  other  fiscal  officer  of  a  bank  or  corporation."  Gf.  Id.  §  37.  As 
to  indorsement  by  a  payee  or  indorsee  whose  name  is  misspelled  or  wrongly 
designated,  see  Neg.  Inst.  L.  §  73.  "Where  an  instrument  Is  payable  to  the 
order  of  two  or  more  payees  or  indorsees  who  are  not  partners,  all  must  In- 
dorse, unless  the  one  Indorsing  has  authority  to  Indorse  for  the  others." 
Neg.  Inst.  L.  §  71.  This  states  the  common-law  rule.  If  one  undertakes  to 
indorse,  he  transfers  only  his  interest  by  way  of  equitable  assignment. 
CARVICK  V.  VICKERY,  2  Doug.  653;  SMITH  v.  WHITING.  9  Mass.  334; 
Dwight  V.  Pease,  3  McLean,  94,  Fed.  Cas.  No.  4,217;  Daniel,  Neg.  Inst  \% 
684,  701a. 

»'  COCK  T.  FELLOWS,  1  Johns.  (N.  Y.)  143;  PREVOT  T.  ABROTT.  P 
Taunt.  786.  In  this  case  the  plaintiff  averred  delivery  to  him  by  the  d'ctend 
ant,  and  also  the  facts  of  acceptance,  presentment  for  payment,  and  dishonor. 
.Judgment  for  plaintiff  was  arrested  after  verdict  for  the  reason  that  Indorse- 
xmrit  by  the  defendant  had  not  been  averred.  Pease  v.  Hirst,  10  Barn.  &  0. 
122;    Freeman  v.   Perry,  22  Conn.  617;    Newuiau   v.   Raveuscroft,  67   111.  496; 


134  INDORSEMENT.  (Ch.   4 

This  is  because  of  several  reasons.  The  first  is  that  the  property  of 
the  instrument  is  in  the  pajee.®^  Until  he  indorses  it,  the  legal  title 
is  not  transferred.*  Mere  possession  by  some  one  else  of  the  in- 
strument unindorsed  does  not  entitle  that  other  person  to  the  full 
rights  of  a  bona  fide  purchaser,  and  if  the  maker  or  acceptor  pays  it 
to  such  person,  it  is  at  the  risk  of  possible  re-payment.®'  But  this 
rule  is  not  universal  in  its  application.  An  indorsement  is  only 
necessary  to  transfer  the  legal  as  distinguished  from  the  equitable 
title  to  the  paper.  If  by  mistake,  accident,  or  fraud,  the  indorse- 
ment has  been  omitted,  when  it  was  intended  that  the  indorsement 
should  be  made,  the  payee  may  be  compelled  by  a  court  of  equity 
to  make  the  indorsement.  Meantime  the  transferee  holds  the  bill  or 
note  under  the  same  rights  that  he  would  have  acquired  under  the 
assignment  of  paper  not  negotiable.  In  other  words,  he  is  the  ben- 
eficial owner,  and  has  those  rights  and  only  those  rights  against  prior 
parties  which  the  payee  or  his  assignor  might  have, — and  every  equi- 
table defense  available  against  them  is  available  against  him.^**" 
This  rule  applies  to  subsequent  holders.  In  cases  of  indorsements 
in  full,  the  indorsee  in  such  indorsement  named  must  for  the  same 
reasons  himself  indorse  the  instrument.     In  no  other  way  will  the 

Woodbury  v.  Woodbury,  47  N.  H.  11;  Lewis  v.  Hathman,  7  Ind.  585;  Titcomb' 
V.  Thomas,  5  Greenl.  282;   Pease  v.  Dwight.  6  How.  (U.  S.)  190. 

»8  An  infant  who  is  holder  or  payee  of  a  note  or  bill  may  transfer  It  by 
Indorsement.  HARDY  v.  WATERS,  38  Me.  450,  Johns.  Cas.  Bills  &  N.  152; 
SPENCER  V.  ALLERTON,  60  Conn.  410.  22  Atl.  778;  Id.,  Johns.  Cas,  Bills- 
&  N.  120;  BANK  OP  JAMAICA  v.  JEFFERSON,  92  Tenn.  537,  22  S.  W.  211;. 
Id.,  .Johns.  Cas.  Bills  &  N.  126. 

*  Ellis  V.  Brown,  6  Barb.  282, 

»»  Doubleday  v.  Kress,  50  N.  Y.  410. 

100  HARROP  V.  FISHER,  9  Wkly.  Rep.  667,  10  C.  B.  (N.  S.)  196;  Heds^es  v, 
Sealy,  9  Barb.  214;  Freund  v.  Importers'  &  Traders'  Nat.  Bank,  6  Thorap.  & 
C.  236;  WOODWORTH  v.  HUNTOON,  40  111.  131,  Johns.  Cas.  Bills  &  N.  150; 
Minor  v.  Bewick,  55  Mich.  491,  22  N,  W.  12.  Subsequent  indorsement  does- 
not  place  him  in  a  better  position  in  this  respect  if  after  maturity,  or  if  he 
had  in  the  meantime  acquired  notice  of  existing  equities.  WHISTLER  v.  FORS- 
TER,  14  C.  B.  (N.  S.)  248;  OSGOOD'S  ADM'RS  v.  ARTT  (C.  C.)  17  Fed.  575. 
Of.  Neg,  Inst.  L.  §  79.  This  section  provides  that  In  cases  of  transfer  without 
Indorsement  "the  transfer  vests  in  the  transferee  such  title  as  the  transferror 
had  therein,  and  the  transferee  acquires,  in  addition,  the  right  to  have  the 
indorsement  of  the  transferror."  "It  establishes  the  equitable  rule  as  tlir 
rule  at  law."     Huffcut,  Neg.  Inst.  26.     See,  also,  post,  p.  200. 


§  66)  REQUISITES    OF    INDORSEMENT.  135 

transfer  convey  the  leg^al  title  to  the  holder,  so  that  he  can  at  law 
hold  the  other  parties  liable  to  him.  The  second  reason  rests  upon 
the  theory  that  the  liabDity  of  indorsers  to  each  other  is  regulated 
by  the  position  of  their  names.  This  reason  also  is  restricted  in  its 
application.  To  this  rule,  too,  the  irregular  indorser,  who  has  not 
owned  the  paper,  and  to  whom  no  such  transfer  has  been  made,  is  also 
an  exception;  ^**^  although,  of  course,  where  the  second  accommoda- 
tion indorser  of  an  instrument  has  paid  and  taken  it  up,  he  becomes 
a  holder  for  value,  and  may  compel  the  first  accommodation  indorser 
to  pay  him,  although  both  are  accommodation  indorsers.^"''  But, 
leaving  aside  the  doctrine  of  irregular  indorsements,  the  contract 
which  each  indorser  makes  when  he  indorses  the  paper  is  that  he  is 
liable  to  every  subsequent  indorsee,  just  as  every  antecedent  party  is 
liable  to  him.  The  liability  is  several.  It  is  successive.  And  the 
object  of  the  rule  is  only  to  maintain  these  indorsements  in  the  reg- 
ular order  of  their  liability.  It  does  not  go  further  than  this.  Thus 
where  ^**'  A  made  a  note  payable  to  B  or  order,  and  B  afterwards 
indorsed  the  note  to  C,  who  afterwards  indorsed  it  to  B  again,  the 
court,  upon  suit  by  B  against  C,  refused  a  recovery  because  it  was  a 
prior  indorser  calling  upon  a  subsequent  one;  and  the  inference  of 
the  decision  is  that  this  course  was  not  allowed  because  it  involved 
circuity  of  action.  One  who  has  indorsed  a  bill  or  note,  and  become 
liable  as  indorser,  cannot,  as  a  rule,  on  having  the  instrument  rein- 
dorsed  to  him  by  the  other,  bring  an  action  against  him  on  the  in- 
dorsement, for  the  intermediate-  indorsee  would  have  his  remedy 
over,  and  the  result  of  the  action  would  be  to  place  the  parties  in 
precisely  the  same  situation  as  before  any  action  at  all.  But  if  such 
prior  indorser  had  indorsed  without  recourse,  or  if  the  circumstances 
otherwise  negatived  the  right  of  his  intermediate  indorsee  to  sue 
upon  the  indorsement,  the  objection  as  to  circuity  of  action  would  be 
removed,  and  the  prior  indorser  could  recover  under  the  indorse- 
ment back  as  indorsee.*"* 

101  EASTERLY  v.  BARBER.  66  N.  Y.  433;  Oreusol  v.  Hubbard.  51  Mich. 
95,  16  N.  W.  248;    Brewer  v.  Boynton,  71  Mich.  254,  3!)  N.  W.  49. 

10*  Kelly  V.  Burroughs.  102  N.  Y.  93,  6  N.  E.  109;  HoUoway  v.  Qulnn,  18 
Wkly.  Notes  Cas.  284. 

108  RIRIIOP  V.  HAYWARD.  4  Term  R.  470. 

104  In  WILDEKS  v.  STEVENS,  a  bill  wus  drawn  by  plaintiffs  to  their  order. 


136  INDORSEMENT.  (Ch.  4 

Necessity  for  Delivery. 

As  in  the  case  of  the  inception  of  the  original  contract  rights 
under  the  principal  terms  of  the  instrument,  and  also  under  the 
acceptance,  an  indorsement  requires  delivery.^"*'  And  the  rules  and 
reasons  relating  to  the  delivery  of  an  indorsed  instrument  by  the 
payee  or  indorser  are  in  most  respects  the  same  as  those  already 
given  relating  to  the  delivery  of  bills  and  notes  and  of  acceptances. 
The  negotiation  of  the  instrument  begins  with  the  act  of  indorse- 
ment as  distinguished  from  the  intention  of  the  parties  to  indorse,^**' 
and  is  consummated  by  the  delivery  of  the  instrument  and  its  ac- 
ceptance with  the  intention  to  pass  and  vest  title.  On  these  simple 
acts  the  whole  contract  rests.  The  law  prima  facie  presumes  the 
other  elements  of  contract.  For  example,  delivery  once  being  made 
and  the  title  having  once  passed,  these  facts  of  themselves  import  a 
consideration.^"^  Possession  of  the  instruments  obviates  the  ne- 
cessity ^f  pleading  delivery,  non-delivery  being  wholly  a  matter  of 
afiSrmative  defense.^"*  And  the  term  ''indorsed"  in  pleading  in- 
cludes delivery  for  value  to  the  indorsee.^"'  But  both  indorse- 
on  J.  H.,  and  It  was  then  Indorsed  by  plaintiffs  to  defendant  and  by 
defendant  to  plaintiffs.  It  was  claimed  that  circuity  of  action  would  arise 
from  such  Indorsement.  It  was  shown  in  the  pleading  that  the  Indorsement 
by  the  defendant  was  to  make  him  liable  as  surety,  and  the  court  held  that, 
inasmuch  as  the  defendant  could  not  sue  the  plaintiff,  the  objection  as  to 
circuity  being  removed,  the  plaintiffs  might  recover  from  the  defendant.  15 
Mees.  &  W.  208.  MOORE  v.  CROSS,  19  N.  Y.  227;  Rand.  Com.  Paper,  §  719. 
Compare  Neg.  Inst.  L.  §  80. 

100  SPENCER  V.  CARSTARPHEN,  15  Colo.  445,  24  Pac.  882;  Id..  Jolins. 
Cas.  Bills  &  N.  117;  Pardee  v.  Lindley,  31  111.  174;  Richards  v.  Darst.  51  111. 
140;  BADGLEY  v.  VOTRAIN,  68  111.  25;  Kyle  v.  Thompson,  2  Scam.  432.  As 
to  whether  delivery  Is  necessary  to  constitute  an  acceptance,  see  ante,  p.  88. 
"  'Indorsement'  means  an  indorsement  completed  by  delivery."  Neg.  Inst.  L. 
§2. 

106  GOSHEN  NAT.  BANK  v.  BINGHAM,  118  N.  Y.  349,  23  N.  E.  ISO. 

107  HOOK  V.  PRATT,  78  N.  Y.  371;  Durham  v.  Manrow,  12  N.  Y.  533; 
Keteltas  v.  Myers,  19  N.  Y.  231;  RUSSELL  v.  WHIPPLE.  2  Cow.  536;  Chap- 
pell  V.  Bissell,  10  How.  Prac.  274;   Marshall  v.  Rockwood,  12  How.  Prac.  452. 

108  Peets  V.  Bratt,  6  Barb.  662;   Lafayette  Ins.  Co.  v.  Rogers,  30  Barb.  49. 

109  In  the  case  of  MARSTON  v.  ALLEN,  8  Mees.  &  W.  494,  one  Harrop,  a 
bank  accountant,  drew  a  bill  payable  to  himself  upon  defendant,  who  was  in- 
debted to  the  bank,  which  was  accepted  by  defendant.  The  bill  was  signed  on 
the  back  by  Harrop  and  given  to  W.  Marston,  another  employ6,  to  keep  for  the 


§  66)  REQUISITES   OF   INDORSEMENT.  137 

ment  and  delivery  must  concur  in  the  transfer.'^"  The  indorsement 
without  delivery  is  nothing,  although  the  indorser  has  in  fact  signed 
his  name  and  the  indorsee  knows  that  it  is  signed.  Still  the  con- 
tract so  far  as  it  has  gone  may  be  revoked  by  the  indorser,  and  the 
indorsement  countermanded,^ ^^  unless  some  contract  right  other 
than  that  of  the  indorsement  itself  exists  in  the  indorsee.  The  de- 
livery must  be  by  the  indorser,  otherwise  the  transfer  of  the  instru- 
ment is  not  by  his  order.  His  executor  or  administrator  even  can- 
not make  delivery,  although  the  payee  before  his  decease  has  writ- 
ten his  name  upon  it.*^^  So,  too,  if  a  transferee  of  a  bill  or  note  send 
it  back  to  his  indorser,  refusing  to  accept  it,  this  is  a  refusal  of  an 
offer,  and  his  subsequently  getting  possession  of  the  instrument 
without  the  assent  of  the  indorser  will  not  invest  him  with  title, 
because  there  was  then  no  intention  to  contract  present  between 
them,  and  hence  no  contract.^ ^* 

bank.  It  was  testified  by  E.  Marston  that  he  received  this  bill,  for  value, 
from  W.  Marstc/n,  and  that  he  had  indorsed  and  delivered  It  for  value  to  the 
plalntiix.  It  was  held  that  the  indorsement  and  delivery  of  the  bill  to  W. 
Marstoii  waa  not  to  him  as  indorsee,  and  was  consequently  not  such  indorse- 
ment as  to  transfer  the  bill.  In  ADAMS  v.  JONES,  a  bill  drawn  on  and  ac- 
cepted by  defendant  was  indorsed  in  blank  by  J.  F.  and  delivered  to  plaintiff 
to  deliver  to  R.  The  defendant,  being  acceptor,  was  notified  by  R.  not  to  pay 
to  plaintiff,  and  refused  payment.  On  the  action  in  assumpsit  being  brought, 
X  was  held  that  plaintiff  had  no  title  to  sue,  but  that  he  held  the  bill  only  as 
the  agent  of  R.  12  AdoL  «&  E.  455.  Federick  v.  Winans,  51  Wis.  472,  8  N.  W. 
301;  HIGGINS  v.  BULLOCK,  66  111.  37;  Freeman's  Bank  v.  Ruckman,  16 
'Brat.  129;  Dana  v.  Norrls,  24  Conn.  333. 

110  In  BUCKLEY  v.  HANN,  the  action  was  upon  a  bill  drawn  by  W.  and  in- 
dorsed to  plaintiff,  and  it  was  shown  that  the  bill  was  drawn  and  accepted  and 
W.'8  name  signed  upon  it,  and  that  it  was  then  by  messenger  sent  to  plaintiff, 
who  lived  some  distance  from  London,  W.'s  residence.  Under  the  statute  re- 
quiring that  the  whole  cause  of  action  must  arise  In  the  city,  It  was  held  that 
the  action  could  not  be  maintained,  since  indorsement  was  inoperative  without 
delivery.     5  Eich.  43. 

1"  RRIND  V.  HAMPSHIRE,  1  Mees.  &.  W.  305. 

iuBKOMAGE  v.  LLOYD,  1  Exch.  .''.2;  MARSTON  v.  ALLEN.  8  Meos.  & 
W.  494. 

118  Caitwrlght  t.  Williams,  2  Starkle,  340.  Thus,  In  the  case  of  BRIND  t. 
HAMPSHIRE,  one  Usher  indorsed  a  bill,  payable  to  himself,  to  the  order  of 
B.,  and  gave  It  to  the  defendant  to  deliver  to  B.  Before  this  had  been  done. 
Usher  directed  defendant  not  to  deliver  the  bllL     B.,  knowing  the  facts,  brought 


138  INDORSEMENT.  (Ch.  4 

IRREGULAR  INDORSEMENTS. 

67.  A  person  -whose  narae  is  on  the  back  of  a  bill  or 
note  payable  to  the  order  of  the  maker  or  draw^er,  or 
payable  to  bearer,  is  to  be  deemed  an  indorser. 

68.  Where  a  person  signs  his  name  on  the  back  of  a 
negotiable  bill  or  note  payable  to  order  of  third  person, 
before  the  signature  of  the  payee,  different  rules  prevail 
in  different  jurisdictions  as  to  the  liability  of  the  irregular 
indorser. 

(a)  In  some  jurisdictions  he  is  prima  facie  presumed 

to  assume  no  liability  to  the  payee,  and  to  be 
a  second  indorser;  but  this  presumption  may  be 
rebutted  by  showing  that  the  indorsement  w^as 
made  to  give  the  maker  credit  VTith  the  payee, 
and  the  irregular  indorser  then  becomes  liable 
as  first  indorser,  upon  the  theory  that  the  payee 
may  indorse  to  him  -without  recourse,  and  fill 
up  the  blank  indorsement  of  the  irregular  in- 
dorser to  himself. 

(b)  In  other  jurisdictions  the  irregular  indorser  is  pre- 

sumed to  be  a  joint  maker. 

(c)  In  other  jurisdictions  he  is  presumed  to  be  a  guar- 

antor. 

(d)  In  other  jurisdictions  he  is  presumed  to  be  an  in- 

dorser. 

(e)  In  other  jurisdictions  the  liability  of  the  irregular 

indorser  is  regulated  by  statute. 

If  an  instrument  is  payable  to  bearer,  or  to  order  of  the  maker 
or  drawer,  and  indorsed  in  blank,  so  that  it  passes  by  delivery,  a 
person,  not  otherwise  a  party  to  the  instrument,  whose  name  ap- 

action  in  trover  to  recover  the  bill.  In  was  held  that  the  indorsement  without 
delivery  was  insufficient  to  give  B.  the  right  to  maintain  the  action.  There  was 
no  binding  obiigation  between  plaintiff  and  defendant,  merely  an  inchoate  con- 
tract    1  Mees.  &  W.  365. 


§§  67-68)  IRREGULAR    INDORSEMENTS,  139 

pears  on  the  back,  is  deemed  to  be  an  indorser  only."*  In.  such  case 
the  name  of  the  indorser  appears  in  its  reguUir  place  upon  the  in- 
strument, and  is  treated,  as  in  fact  it  appears  to  be,  as  if  it  had  been 
made  by  one  to  whom  the  instrument  had  been  delivered,  and  who, 
before  himself  transferring  it  by  delivery,  had  indorsed  it  in  order 
to  incur  the  liability  of  indorser  to  his  transferee  and  sul)se- 
quent  holders.  The  effect  of  the  indorsement  cannot  be  varied  by 
parol  proof. 

Where,  however,  an  instrument  bearing  upon  its  back  the  signa- 
ture of  a  person  not  otherwise  a  party  is  payable  to  the  order  of  a  spe- 
cific payee,  who  is  not  the  maker  or  drawer,  a  different  question 
arises.  On  the  one  hand  we  are  met  with  the  objections  that  no  one 
but  the  payee  or  a  subsequent  holder  can  be  an  indorser,  and  that 
the  contract  actually  intended  is  not  expressed.  On  the  other  han-d 
it  is  obvious  that  the  irregular  indorser  intended  to  assume  liability 
of  some  kind,  and,  if  the  irregular  indorsement  was  made  before  de- 
livery, intended  to  assume  liability  in  favor  of  the  payee.  Different 
courts  have  determined  the  nature  of  this  liability  in  different  ways, 
and  the  decisions  of  the  courts  of  the  various  states  are  in  hopeless 
conflict. 

In  New  York,  and  in  some  other  jurisdictions,  a  curious  device 
has  been  adopted  for  carrying  into  effect  the  intention  of  the  par- 
ties in  such  cases.  The  problem  was  to  overcome  the  legal  pre- 
sumption from  the  face  of  the  note  that  such  an  indorser  stood  in 
the  position  of  a  subsequent  indorser  to  the  payee.  So  far  as  the 
paper  showed  the  record  of  the  transaction,  such  an  indorser  could 
only  be  presumed  to  have  intended  to  become  liable  as  second  in- 
dorser, and  could  only  be  regarded  as  such,  and  of  course  not 
liable  upon  the  instrument  to  the  payee,  who  was  supposed  to 
be  the  first  indorser.  The  court,  construing  the  instrument  be- 
fore it,  was  bound  to  consider  the  order  of  its  transfer,  as,  first, 
from  the  maker  or  drawer  to  the  payee;  second,  an  indorsement 
by  the  payee  to  the  irregular  indor'-vr  as  his  indorsee;    and,  lastly, 

"<  Bigelow  T.  Colton,  13  Gray  (Mass.)  SCJ;  Dubois  v.  Mason,  127  Mass.  37; 
Thar-her  v.  Stevens,  40  Conn.  5G1;  Heath  v.  Van  Cott,  9  Wis.  510;  ARM- 
STRONG V.  HARSITMAN,  61  Ind.  r>2;  FIRST  NAT.  RANK  v.  PAYNE,  111  Mo. 
21>1,  20  S.  W.  41;  Ilately  v.  Pike,  162  IlL  241,  44  N.  E.  441;  Daniel,  Neg.  Iniet. 
f  707a.     See  Neg.  Inst,  L.  {  114. 


140  INDORSEMENT.  (Ch.  4 

by  the  irregular  indorser  to  the  subsequent  indorsee  on  the  pa- 
j>er.  Thus,  the  payee  could  not  hold  such  an  indorser  liable  be- 
cause he  was,  so  far  as  the  paper  showed,  his  indorsee.**"  But  the 
courts  soon  saw  that  carrying  this  doctrine  to  all  lengths  would 
often  mean  the  enforcement  of  theory  at  the  expense  of  justice,  and 
of  defeating  the  intent  of  the  parties.  The  purpose  of  the  irregular 
or  anomalous  indorser  in  making  the  indorsement,  and  of  the  payee 
in  receiving  the  instrument  with  such  an  indorsement,  was  to  enter 
into  a  contract  of  indemnity.  The  payee  took  the  instrument  for 
value  because  the  indorser's  name  was  there.  Hence  in  such  cases 
the  rule  was  relaxed.  The  paper  itself  was  held  to  furnish  only 
prima  facie  evidence  of  this  intention.  It  was  competent  to  rebut 
this  presumption  by  parol  proof  that  the  indorsement  was  made  to 
give  the  maker  credit  with  the  payee.  To  meet  the  objection  that 
the  payee,  in  order  to  complete  the  chain  of  transfer,  must  needs 
be  the  first  indorser,  the  payee,  as  holder,  was  permitted  to  indorse 
the  instrument  to  the  accommodation  indorser  without  recourse, 
and  to  fill  up  the  blank  indorsement  of  the  accommodation  indorser 
to  himself.  In  this  way  the  parties  were  placed  in  the  same  posi- 
tion as  if  the  maker  had  in  the  first  instance  delivered  the  note 
to  the  payee,  the  payee  had  then  indorsed  it  without  recourse  to  the 
accommodation  indorser,  and  the  accommodation  indorser  had  then 
indorsed  it  to  the  payee.  This,  moreover,  could  be  done  at  any 
time, — on  the  trial,  or  even,  if  omitted  then,  on  an  appeal.  The 
practical  effect  of  this  course  was  to  obviate  the  difficulty  raised  by 
the  other  rule  we  have  just  mentioned, — that,  where  an  instrument 
came  into  the  hands  of  a  person  who  already  appeared  upon  it  as  a 
payee,  he  could  not  maintain  an  action  against  any  of  the  parties 
whose  indorsements  were  subsequent  to  the  first  appearance  of  his 
name,  because  each  of  these  persons,  on  paying  him  the  note,  would 
have  an  immediate  right  to  demand  payment  from  him  on  his  ear- 
lier indorsement  The  law  in  such  case,  to  avoid  this  circuity, 
denied  him  the  right  of  action.  But,  by  the  intervention  of  this 
device,  this  defense  of  circuity  was  not  available  against  him,  be- 
cause the  irregular  or  anomalous  indorser,  under  his  agreement  of 
indemnity  with  the  payee,  could  have  no  right  of  action  against  the 

tiB  Herriok  v.  Carman,  12  Johns.  159;    Tillman  v.  Wheeler,  17  Johns.  325; 
Bacon  v.  Burnham,  37  N.  Y.  614;   Phelps  v.  Vischer,  50  N.  Y.  69. 


$§  67-68)  IRREGULAR    INDORSEMENTS.  141 

payee,  and,  the  reason  failing,  the  rule  itself  fell  to  the  ground.^^* 
It  is  important  to  notice  that  it  is  incumbent  on  the  payee  suing  the 
indorser  to  show  that  such  indorsement  was  made  by  the  indorser 
to  give  credit  to  the  note,  and  was  taken  by  him  because  of  such 
credit.  He  cannot  be  silent  upon  this  point,  and  avail  himself  of 
the  rule,  for  the  presumption  is  that  such  an  indorser  is  a  second 
indorser,  and  not  liable  to  the  payee.  The  burden  is  upon  the 
payee  to  show  that,  by  agreement  between  the  parties,  the  liability 
is  otherwise. 

But  these  reasons  and  rules  do  not  prevail  throughout  the 
Union-  nor  do  they  prevail  in  England.  In  the  rule  just  set  forth 
the  plain  effect  of  the  writing  was  overcome  and  contradicted  by 
parol  evidence.  And  many  of  the  courts  have  not  seen  fit  to  flatly 
defy  this  rule  of  evidence.  These  courts  have  sought  either  to  dis- 
tinguish and  make  the  case  an  exception  to  this  rule  of  evidence, 
or  to  carry  out  the  intention  of  the  parties  in  other  ways.  In  dis- 
tinguishing the  rule  they  have  made  a  difference  in  its  application 
to  immediata  and  to  remote  parties.  Between  immediate  parties 
ir  was  thought  that  the  indorsement  in  blank  implied  an  authority 
to  write  ever  i!;  anything  that  was  in  fact  agreed  upon  by  the  par- 
tics.  It  was  therefore  perfectly  competent  both  to  show  by  parol 
e\idence  what  this  agreement  was,  and  also,  such  agreement  being 
shown,  for  the  courts  to  carry  it  into  effect.  K  the  agreement  was 
to  indorse,  then  the  writing  of  the  name  was  to  be  an  indorsement,^^'' 
if  to  guaranty,  then  the  writing  was  to  be  a  guaranty;  ^^'  and  so 
likewise  in  cases  of  surety  or  joint  maker."'     But  in  case  of  remote 

ii«  HALL  V,  NEWCOMB,  3  Hill,  233,  s.  c.  in  error  7  HIU,  416.  In  this  case 
a  promissory  note  payable  to  H.  was  made  by  F.  This  was  indorsed  in  blank 
by  N.  for  the  accommodation  of  F.,  and  knowing  that  It  was  the  Intention  of 
F.  to  obtain  money  from  H.  upon  It.  H.  took  the  note  and  supplied  the  amount 
desired.  N.  was  held  not  to  be  liable  to  H.  as  maker  or  guarantor,  but  to  be 
liable  as  an  Indorser  only.  MOORE  v.  CROSS.  19  N.  Y.  227;  COULTER  v. 
I'JCPIMOND,  59  N.  Y.  478;  JaCfray  v.  Brown,  74  N.  Y.  393;  Karam  v.  Hol- 
land, 2  Or.  59;  Wade  v.  Crelghton,  25  Or.  455,  3G  Pac.  289;  Cady  v.  Shepard, 
12  Wis.  G39;  BLAKESLEE  v.  HEWETT,  70  Wis.  341.  44  N.  W.  1105.  In  New 
York  the  liability  of  the  irregular  Indorser  is  now  governed  by  the  Negotiable 
Instruments  I^w.     Tost,  p.  143. 

»iT  Eberhart  v.  Page,  89  111.  550;   Mammon  v.  Hartman.  51  Mo.  IGfl. 

118  Camden  v.  McKoy.  3  Scam.  43;   Taylor  v.  French.  2  Lea,  2G0. 

11*  Rey  V.  Simpson,  22  How.  341;   Walz  v.  Alback,  37  Md.  404. 


142  INDORSEMENT.  ((Jll.    4 

parties,  the  same  reason  could  not  obtain.  Between  them  there  can 
be  no  mutual  understanding,  and  therefore  this  rule,  so  far  as 
showing  by  the  words  or  acts  of  the  parties  what  was  meant  by  the 
writing,  was  rejected.^^**  The  courts  then  fell  back  upon  the  prin- 
ciple that  the  signature  of  the  irregular  indorser  must  have  meant 
something,  and  that  they  would  support  his  act  as  a  contract  of  some 
sort,  rather  than  let  it  fail  as  a  void  obligation.  This  has  given 
rise  to  a  chaos  of  conflicting  authorities,  but  from  out  of  it  the  fol- 
lowing rnles  have  been  classified:  ^^^  In  some  jurisdictions,  for  the 
reason  that  the  irregular  indorser  is  not  the  payee  or  legal  holder, 
and  hence  cannot  be  deemed  an  indorser,  it  is  held  that  he  is  pre- 
sumptively a  joint  maker.^^^  This  rule  prevails  perhaps  more 
widely  than  any  other,  though  in  states  where  it  prevails  the  courts 
differ  as  to  whether  the  presumption  is  conclusive  or  merely  prima 
facie,  and  open  to  rebuttal.  In  other  jurisdictions,  while  the  consid- 
erations just  stated  have  withheld  the  courts  from  treating  the  ir- 
regular indorser  as  in  law  an  indorser,  the  anomalous  position  of  the 
signature  upon  the  back  of  the  instrument  has  also  withheld  them 
from  treating  him  as  a  maker,  and  they  have  held  that  he  was  to  be 
presumed  to  be  a  guarantor.^^^  Nor  does  this  exhaust  the  cata- 
logue of  the  different  liabilities  which  different  courts  have  spelled 
out  of  the  anomalous  indorsement.  In  England  it  seems  that  the 
anomalous  indorser  is  not  liable  at  all.^^*     It  is  impossible  in  a  work 

»2o  Houston  V.  Bruner,  39  Ind.  383;  Whitehouse  v.  Hanson,  42  N.  H.  18. 

121  CROMWELL  V.  HEWITT,  40  N.  Y.  491,  note,  p.  492.  The  student  is 
referred  to  this  note,  and  also  to  the  note  of  Prof.  Ames  (volume  1,  p.  2G9)  to 
BOYNTON  V.  PIERCE,  for  a  large  number  of  collated  cases,  which  are  the 
authority  for  the  above  statement.  See,  also.  Huff  cut,  Neg.  Inst.  479,  note  1; 
Daniel,  Neg.  Inst.  §§  707,  716. 

122  UNION  BANK  v.  WILLIS,  8  Mete.  (Mass.)  504;  Way  v.  Butterworth, 
108  Mass.  509;  GOOD  v.  MARTIN,  95  U.  S.  90;  Colburn  v.  Averlll,  30  Me.  310, 
Schroeder  v.  Turner,  68  Md.  508,  13  Atl.  331;  Gumz  v.  Giegling,  108  Mich.  296, 
66  N.  W.  48;  Robinson  v.  Bartlett,  11  Minn.  410  (Gil.  302);  Schultz  v.  Howard, 
63  Minn.  196,  65  N.  W.  363;  Scanland  v.  Porter,  64  Ark.  470,  42  S.  W.  897; 
Phipps  V.  Harding,  17  C.  C.  A.  203,  70  Fed.  468. 

123  Carroll  v.  Weld.  13  111.  682;  BOYNTON  v.  PIERCE,  79  111.  145;  Kings- 
land  V.  Koeppe,  137  111.  344.  28  N.  E.  48;  Firman  v.  Blood,  2  Kan.  496;  Lank 
V.  Morrison,  44  Kan.  594,  24  Pac.  1106;  Arnold  v.  Bryant,  8  Bush.  668  (Ky. 
statute);   Lyon,  Potter  &  Co.  v.  Bank,  29  C.  C.  A.  45,  85  Fed.  120  (Iowa  statute). 

124  2  Ames,  Bills  &  N.  p.  839,  citing  LECAAN  v.  KIRKMAN,  6  Jur,  (N.  S.) 


§§  67-68)  IRREGULAR   INDORSEMENTS.  143 

of  this  character  to  discuss  at  length  the  reasons  for  these  various 
conflicting  rules,  or  their  qualifications,  for  they  have  been  only 
broadly  stated.  The  student  must  fix  in  his  mind  the  general  clas- 
sification, and  should  consult  in  detail  the  authorities  in  his  par- 
ticular state. 

An  important  step  towards  uniformity  on  this  subject  has  al- 
ready been  attained  by  the  adoption  in  many  states  of  the  Nego- 
tiable Instruments  Law,  which  provides:  "Where  a  person,  not  oth- 
erwise a  party  to  an  instrument,  places  thereon  his  signature  ip 
blank  before  delivery,  he  is  liable  as  indorser  in  accordance  with 
the  following  rules:  (1)  If  the  instrument  is  payable  to  the  order 
of  a  third  person,  he  is  liable  to  the  payee  and  to  all  subsequent  par- 
ties. (2)  If  the  instrument  is  payable  to  the  order  of  the  maker  or 
drawer,  or  is  payable  to  bearer,  he  is  liable  to  all  parties  subse- 
quent to  the  maker  or  drawer.  (3)  If  he  signs  for  the  accommo- 
dation of  the  payee,  he  is  liable  to  all  parties  subsequent  to  the 
payee."  ^*'  This  enactment  has  the  further  advantage  that  it  abol- 
ishes so-called  "presumptions,"  and  lays  down  definite  rules  of  lia- 
bility, and  that  it  probably  gives  expression  as  nearly  as  possible  to 
the  actual  intention  of  the  parties  in  such  cases. 

17;  Steele  v.  McKinlay,  5  App.  Cas.  754;  GWINNELL  v.  HERBERT,  5  Adol. 
&  B.  436. 

126  Neg.  Inst.  L.  §  114.  Cf.  Id.  §§  36,  subd.  6, 113,  117.  See  Kohn  v.  Egg  Co.. 
63  N.  Y.  Supp.  265,  30  Misc.  Rep.  725  (arising  under  section  114).  The  liability 
of  irregular  Indorsers  had  been  the  subject  of  legislation  In  various  states  prior 
to  the  adoption  of  the  Negotiable  Instruments  Law  by  some  of  them.  See 
Daniel,  Neg.  Inst.  §  714;   Rand.  Com.  Paper,  §§  831,  836,  838,  839,  844. 


144  or   THE   NATURE   OF    THE   LIABILITIES    Of    THE    PABTIES.       (Ch.  & 

CHAPTER  V. 

OF  THE  NATURE  OP  THE  LIABILITIES  OF  THE  PARTIES. 

69.  Acceptor  and  Maker. 

70.  Facts  which  the  Acceptor  Admits. 

71.  Facts  which  the  Acceptor  does  not  Admit. 
72-73.  Acceptor  Supra  Protest. 

74r-76.  Drawer  and  Indorser. 

77.  Undertaking  of  Drawer. 

78.  Wai-ranties  of  Indorser. 

79.  Warranties  of  Indorser  without  Recourse— Of  Transferror  by  De- 

livery. 

80.  Damages  against  the  Acceptor,  Maker,  Drawer,  and  Indorsers  upon 

the  Bill  or  Note  and  upon  the  Warranties. 
81-83.    Accommodation  Parties  and  Persons  Accommodated. 
83a-83b.    Conflict  of  Laws. 

ACCEPTOR  AND  MAKER. 

69.  The  acceptor  and  maker  each  promises  the  payee 
and  subsequent  holders  that  he  will  pay  the  bill  or  note 
according  to  its  tenor  at  the  time  of  signing.* 

Under  §  41,  we  commented  upon  the  shifting  relations  of  the 
holder  with  the  drawer  and  the  drawee  or  acceptor  of  a  bill  before 
and  after  acceptance.  And  in  a  later  section  we  shall  show  that 
the  phrase,  "The  acceptor  of  a  bill  and  the  maker  of  a  note  is  the* 
principal  debtor  thereon,"  means  that  as  against  them  there  is  no 
necessity  for  presentment  at  a  particular  place,  or  of  protest,  or  of 
notice  of  dishonor,  and  that  all  parties  look  to  them  to  eventually 
pay  the  instrument.  As  has  been  shown,  the  bill  and  its  accept- 
ance amounts  to  a  transfer  to  the  holder  of  property  of  the  drawer 
in  the  acceptor's  hands  to  the  amount  of  its  face  value.  Jn  tech- 
nical phrase,  there  is  a  direct  privity  of  contract  between  the  holder 
and  acceptor,  and  at  common  law  an  acceptance  was  evidence  of 
money  had  and  received  by  the  acceptor  to  the  use  of  the  holder. *^ 

•  See  Neg.  Inst.  L.  §§  110,  112. 

1  Black  V.  Caffe,  7  N.  Y.  281;   Wolcott  v.  Van  Santvoord,  17  Johns.  248. 


§  69)  ACCEPTOR    AND    MAKER.  146 

The  drawer  is  presumed  to  draw  upon  his  funds  in  the  hands  of  the 
drawee;  the  payee  is  presumed  to  have  given  a  full  value  for  the 
bill;  and,  when  the  drawee  accepts  the  bill,  he  becomes  an  imme- 
diate debtor  to  the  payee,  as  upon  a  valuable  consideration  paid  to 
the  drawer  by  the  payee  and  by  the  drawer  to  the  acceptor  of  the 
funds  in  the  hands  of  the  acceptor.  The  acceptor  stands  in  the  same 
relation  to  the  payee  as  the  maker  of  a  note  does  to  the  indorsee;  and 
the  drawer  is  regarded  in  the  light  of  an  indorser. 

But  the  student  must  not  identify  the  acceptor  of  a  bill  and  the 
maker  of  a  note  further  than  that  they  make  the  same  promise  to 
the  payee  and  subsequent  holders.  Beyond  this  point  they  differ. 
An  acceptor  enters  into  a  contract  relation  based  upon  rights  or 
liabilities  accruing  to  or  against  the  drawer,  payee,  and  perhaps  in- 
dorsers.  The  maker  can  make  but  one  contract,  and  that  is  with 
the  payee.  All  other  rights  and  liabilities  arising  to  or  against  the 
makers  of  notes  are  merely  a  transfer  of  such  as  the  payee  himself 
has.  But  with  the  acceptor,  there  is  a  call  for  the  adjustment  of 
the  conflicting  rights  of  drawer  and  acceptor,  drawer  and  payee, 
payee  and  acceptor,  and  perhaps  of  indorsers  with  each  of  these 
parties  and  with  each  other  prior  to  the  time  of  acceptance — a  body 
of  rights  and  liabilities  distinct  from  any  involved  in  the  making  of 
a  note.  These  will  be  discussed  therefore  in  the  sections  next  follow- 
ing. All  that  is  meant  to  say  here  is  that  there  is  no  difference  in 
their  contract  classification  between  the  promise  of  the  maker  and 
that  of  the  acceptor  to  pay  the  money  called  for  in  the  instrument.'^ 
They  are  alike,  independently  of  all  other  contract  rights,  prima  facie 
promises  to  jyay  the  instrument  when  it  becomes  due  according  to  the 
tenor  of  the  instrument.* 

»  Bull  V.  Sims,  23  N.  Y.  .570;  Falrchlld  v.  Ogdensburgh  R.  Co.,  15  N.  Y.  a37: 
MILLER  V.  THOMSON,  3  Man.  &  G.  576;  Wardens  &  Vestrymen  of  St.  James 
Church  V.  Moore,  1  Ind.  289;    Marlon  &  M.  R.  R.  r.  Hodge,  9  Ind.  1G3. 

•  HOFFMAN  V.  BANK,  12  WalL  181. 
NEG.BILLS.— 10 


146  OF    THE   NATURE    OF   THE    LIABILITIES    OF   THE   PARTIES.       (Ch.  5 


FACTS  WHICH  THE  ACCEPTOR  ADMITS. 

70.  The  acceptor  of  a  bill  of  exchange,  by  the  accept- 
ance, admits  as  against  a  bona  fide  holder:! 

(a)  The  genuineness  of  the  drawer's  signature, 

(b)  The  existence  of  the  dra-wer. 

(c)  The  capacity  of  the  drawer  to  make  the  draft. 

(d)  His  authority  to  dra^wr  for  the  sum  named. 

(e)  Where  the  bill  is  to    the   payee's   order,    that   the 

payee  was  competent  to  make  the  indorsement.* 

What  are  called  the  "warranties"  of  the  acceptor  are  a  phase  of 
the  legal  doctrine  of  estoppel.  "An  estoppel,"  says  Lord  Coke,  "is 
when  a  man  is  concluded  by  his  own  act  or  acceptance  to  say  the 
truth."  And  with  bills  the  acceptor  is  precluded  from  testifying 
in  the  instances  given  in  the  principal  text.  It  may  well  be  in  case 
of  an  acceptor  that  his  drawer  had  no  existence,  or  that  his  signa- 
ture is  forged,  or  that  the  acceptor  had  no  funds  of  the  drawer  in 
his  hands  when  he  accepted  the  bill.  But  the  legal  estoppel  shuts 
out  all  evidence  of  these  facts,  and  thus  they  cannot  avail  as  de- 
fenses. From  this  rule  of  evidence  it  is  but  an  easy  step  to  develop 
a  right  of  quasi  contract.  Tbe  holder  of  the  bill  may,  perhaps,  by 
the  operation  of  this  very  rule,  and  by  its  operation  alone,  be  en- 
abled to  recover  the  amount  of  the  bill  from  the  acceptor.  This  being 
established  as  a  rule  of  business,  it  grows  to  be  something  more 
than  a  mere  rule  of  evidence.  With  indorsements  it  becomes  a  dis- 
tinct right  on  which  persons  may  be  presumed  to  act  when  they  dis- 
count the  instrument.  With  them  it  is  not  inaccurate  to  speak  of 
these  estoppels  as  warranties,  or  distinct  stipulations  created  by  law 
and  embodied  in  the  contract  indorsement.' 

t  See  Neg.  Inst.  L.  §  112. 

*  These  rules  probably  apply  to  the  acceptor  supra  protest  also. 

6  In  the  case  of  BANK  OF  COMMERCE  v.  UNION  BANK,  it  was  held  that 
the  drawee  was  presumed  to  know  the  handwriting  of  the  drawer,  and  the 
payment  of  a  bill  by  him  Is  an  admission  which  the  drawer  may  not  deny  as 
between  himself  and  the  holder.  Even  though  such  signature  is  discovered 
subsequently  to  be  a  forgery  the  drawee  cannot  recover  the  amount  paid  to 
an  innocent  holder.     This  rule  Is  founded  on  the  presumed  negligence  of  the 


§  70)  FACTS    WHICH    THE    ACCKPTOR   ADMITS.  147 

As  between  the  payee  or  some  subsequent  holder,  who  has  taken 
the  bill  in  good  faith,  and  the  acceptor,  whose  acceptance  has  given 
currency  to  the  bill,  the  latter  must  bear  the  loss,  if  any  arises.  He 
may  not  give  in  evidence  any  of  the  defenses  specified  in  the  prin- 
cipal text.^  This  rule  is  based  on  sound  business  reasons.  The  ac- 
ceptor's promise  is  a  distinct  and  separate  one  to  all  parties  who, 
upon  the  faith  of  it,  have  given  value,  in  adjusting  the  equities  be- 
tween parties.  It  is  more  just  to  hold  the  acceptor  to  knowing  his 
€wn  correspondent  with  whom  he  has  business  dealings  than  to 
subject  every  holder  who  may  take  a  bill  in  its  circulation  to  loss 
■or  danger  of  loss  from  parties  of  whom  he  knows  nothing.  "Wlien 
the  acceptor  and  the  holder  are  each  innocent,  the  acceptor,  who 
had  the  best  means  of  knowledge,  is  the  more  negligent  of  the  two, 
and  therefore  the  equities  are  against  him. 

PRICE  V.  NEAL  "^  is  usually  quoted  as  the  leading  case  in  illustra- 
tion of  this.  This  was  an  artion  on  the  case  by  Price  to  recover  from 
Neal  the  sum  paid  him  on  two  bills  of  exchange,  of  which  Price  was 
the  drawee.  One  of  the  bills  had  been  paid  by  Price  without  a 
previous  acceptance;  and  the  other  was  first  accepted,  and,  after 
acceptance,  indorsed  for  value  to  the  defendant,  and  then  paid  at 
maturity.     There  had  been  a  forgery  of  the  drawer's  signature  in 

drawee  to  fall  to  detect  an  irregularity  In  the  signature,  but  does  not  apply 
where  the  forgery  is  in  the  body  of  the  bill.  3  N.  Y.  230.  And  see  WILKIN- 
SON V.  LUTWIDGE,  1  Strange,  648.  Where  a  forged  bill  of  exdiange 
was  accepted  and  paid  by  the  drawee,  he  cannot  recover  back  from  the  in- 
dorsee to  whom  he  paid.  PRICE  v.  NEAL,  3  Burrows,  1354.  An  acceptor  for 
honor  does  not  admit  the  genuineness  of  the  drawer's  signature.  W^ILKINSON 
V.  JOHNSON,  3  Bam.  &  C.  428,  Johns.  Gas.  Bills  &  N.  S3. 

«  Where  one  has  made  a  bona  fide  purchase  for  value  of  a  bill  of  exchange, 
before  It  was  accepted,  or  before  the  drawee  knew  of  Us  existence,  the  ac- 
ceptor will  not  be  estopped  from  showing  that  the  drawer's  signature  Is  not 
genuine.  In  this  ca-se  the  acceptors  had  done  nothing  to  Induce  the  holder  to 
believe  that  the  signature  was  genuine  at  the  time  of  his  purcliase,  and  couse- 
xjuently  he  had  no  right  of  action  against  them.  McKLEKOY  v.  B.\.\K.  14 
La.  Ann.  4.58;  HOFFMAN  v.  BANK,  12  Wall.  ISl.  As  to  the  resi>onsil)illty 
of  a  bank  paying  a  check  upon  It  for  the  genuineness  of  the  drawer's  signa- 
ture, see  National  Bank  of  North  America  v.  Bangs,  lOG  Mass.  441;  Madvln- 
tosh  V.  Eliot  Nat.  Bank,  123  Mass.  393;  Merchants'  Nat.  Bank  v.  Eagle  NuL 
Bank,  101  Mass.  281, 

I  3  Burrows,  1354. 


148  OP   THE   NATURE    OF    THE    LIABILITIES    OF   THE    PARTIES.       (Cb.  5 

the  case  of  both  bills.  Lord  Mansfield  said:  *T:t  was  incumbent 
upon  the  plaintiff  to  be  satisfied  that  the  bill  drawn  upon  him  wa» 
the  drawer's  hand  before  he  accepted  it  or  paid  it;  but  it  was  not 
incumbent  on  the  defendant  to  inquire  into  it."  This  means  that 
it  is  a  just  and  reasonable  rule  in  the  conduct  of  business  to  require 
the  acceptor,  when  the  bill  is  presented  for  acceptance  or  payment, 
to  examine  the  signature  of  the  drawer.  He,  better  than  the  payee 
or  any  innocent  third  party,  can  be  supposed  to  know  the  signature 
and  handwriting  of  the  drawer, — usually  his  customer  or  corre- 
spondent. He,  rather  than  such  party,  should  be  held  to  detect  the 
forgery,  or  to  know  the  fact  that  he  had  no  funds  of  the  drawer  in 
his  hands,  or  that  he  had  no  legal  right  to  enter  into  a  binding  con- 
tract; and  if  he  fails  in  such  examination,  and  acknowledges  by 
his  acceptance  tlie  genuineness  of  the  right  to  make  the  order  upon 
him  contained  in  the  bill,  it  is  his  neglect,  and  must  be  his  loss, 
rather  than  that  of  any  one  who  has  taken  the  bill  in  good  faith  and 
for  value.® 

These  fundamental  reasons,  which  we  have  given  in  the  particu- 
lar instance  of  forgery  of  the  drawer's  signature,  have  governed  the 
courts  in  the  other  cases  we  have  classified.  Where  there  is  no 
such  person  in  fact  as  the  drawer,  then  it  has  been  decided  *  that 

8  HOFFMAN  V.  BANK,  12  Wall.  103;  BANK  OF  UNITED  STATES  v. 
BANK  OF  GEORGIA,  10  Wlieat.  333;  SMITH  v.  CHESTER,  1  Term  R.  655' 
BASS  V.  CLIVE,  4  Maule  &  S.  15;  BANK  OF  COMMERCE  v.  UNION  BANK, 
3  N.  Y,  230;  Goddard  v.  Merchants'  Bank,  4  N.  Y.  (4  Comst.)  149;  CANAL 
BANK  V.  BANK  OF  ALBANY,  1  Hill  (N.  Y.)  287;  NATIONAL  PARK  BANK 
V.  NINTH  NAT.  BANK,  46  N.  Y.  77. 

»  COOPER  V.  MEYER,  10  Barn.  &  C.  468.  In  this  case,  the  defendants  ac- 
cepted for  the  accommodation  of  D.  bills  drawn,  apparently,  by  "W.,  and  some 
by  U.  &  Co.,  and  indorsed  by  the  same,  but  in  fact  drawn  and  indorsed  by  D.,^ 
for  whom  the  bills  were  discounted  by  plaintiff.  It  was  proved  that  the  draw- 
ers and  indorsers  were  fictitious,  and  that  the  names  were  written  by  D.  It 
was  held  that  defendants  should  not  have  accepted  without  knowing  whether 
or  not  there  were  such  persons  as  the  supposed  drawers.  As  they  accepted 
without  inquiry  they  were  considered  as  undertaking  to  pay  to  the  signature 
of  the  actual  drawer.  In  BASS  v.  CLIVE  It  was  held  that  the  acceptor,  before 
accepting  a  bill  drawn  upon  him  In  the  name  of  an  aggregate  firm,  was  bound 
to  know  whether  the  firm  consisted  of  a  plurality  of  persons,  and  when  he  ac- 
cepted he  was  estopped  from  averring  that  It  was  not  in  fact  drawn  by  an  ag- 
gregate firm,  since  he  has  accredited  the  description  by  accepting  the  bill  when 
so  drawn.    4  Maule  &  S.  13. 


§  70)  VACTS    WHICH    THE   ACCEPTOR   ADMITS.  149 

the  fair  construction  of  the  acceptor's  undertaking  is  that  he  will 
pay  to  the  order  of  the  same  person  that  signed  for  the  drawer. 
He  ought  not  to  have  accepted  the  bill  without  knowing  whether  or 
not  there  were  such  persons  as  the  supposed  drawers.  K  he  choosea 
to  accept  without  making  the  inquiry,  then  he  must  be  considered  as 
undertaking  to  pay  to  the  signature  of  the  persoo  who  actually  drew 
the  bill. 

Closely  connected  with  thi3  is  the  kindred  doctrine  that  the  ac- 
ceptor may  not  set  up  as  a  defense  that  the  drawer  had  no  capacity  to 
make  the  draft.  He  may  not,  for  instance,  say  that  the  drawer  is 
an  infant^''  or  a  lunatic  or  a  married  woman ^^  or  a  bankrupt,^' 
or  that,  as  a  corporation,  the  act  of  drawing  was  ultra  vires. ^^  It  is 
no  defense  that  the  acceptor  can  recover  nothing  over  against  the 
drawer  because  the  drawer  is  incapacitated  to  make  a  contract,  or 
because  the  acceptor  has  none  of  the  drawep's  funds  in  his  hands. 
The  acceptor  of  a  bill  in  theory  is  presumed  to  accept  upon  the  funds 
of  the  drawer  in  his  hands.  In  ordinary  business  affairs,  the  very 
theory  of  a  draft  implie3  that  the  acceptor  is  entitled  to  a  credit 
as  between  him  and  the  drawer  on  their  mutual  current  accoimts 
if  he  pays  tne  money  called  for  in  the  bill  or  accepts  it.  And  so, 
if  he  accepts  without  funds  in  his  hands,  and  upon  the  credit  of  the 
drawer,  he  must  look  to  the  drawer  for  his  indemnity.^*  If  the 
acceptor  were  permitted  to  say,  "The  drawer  is  an  infant  or  a  lu- 
natic, and  I  will  not  pay  you  upon  this  bill  because  the  drawer  will 
not  pay  me  or  credit  me  upon  our  mutual  account,"  or  if  he  were 
permitted  to  say,  "I  accepted  the  bill  for  the  accommodation  of  the 
drawer,  and  the  payee  or  holder  took  it  knowing  it  to  be  an  accom- 

10  TAYLOR  V.  CROKER,  4  Esp.  187. 

11  SMITH  V.  MARSACK,  6  C.  B.  486. 

12  BRAITHWAITE  v.  GARDINER,  8  Q.  B.  473. 

i«  HALIFAX  V.  LYLE.  3  Welsb.,  H.  &  G.  446.  In  this  case  a  bill  was 
drawn  by  a  corporation  on  defendant,  and  was  accepted  by  hlra.  The  corpora- 
tion then  Indorsed  the  bill  to  plaintiff.  To  the  action  on  this  bill,  the  defend- 
ant pleaded  that  the  corporation  had  no  right  to  Indorse.  Held,  that  plea  was 
bad;  that  the  acceptor  of  a  bill  payable  to  drawer's  order  was  estopped  frora 
•denying  that  the  drawer  had  authority  to  Indorse  It. 

1*  HOIITSMAN  V.  HENSHAW.  11  How.  177;  .Tarvls  v.  Wilson.  40  Couu.  IK); 
HEUKRTEMATTK  T.  MORRIS,  101  N.  Y.  63,  4  N.  K.  1. 


150  OF    THE    NATURE    OP    THE    LIABILITIES    OF    THE    PARTIES.       (Ch.  & 

modation  acceptance,^'  and  I  will  not  pay  it,"  these  would  be  very 
serious  objections  to  the  bill  being  negotiated.  The  reason  which 
has  influenced  the  courts  is  well  stated  by  Judge  Lawrence  in  Charles 
V.  Marsden.^*  *lt  is  to  be  supposed,"  he  says,  "that  the  drawer  per- 
suades a  friend  to  acce])t  a  bill  from  him  because  he  cannot  lend  him 
money.  Now,  would  there  be  any  objection,  if,  with  the  knowledge 
of  the  circumstance  that  this  is  an  accommodation  bill,  some  person 
should  advance  money  upon  it  before  it  was  due."  The  indorsee  has 
discounted  the  bill  on  the  faith  of  the  acceptor's  promise,  and  it  is  no 
answer  for  the  acceptor  to  say  to  him,  "I  have  received  nothing  for 
this  acceptance." 

We  cannot  do  better  than  follow  Mr.  Daniel  in  his  succinct  state- 
ment of  reasons  for  the  rule  that  the  acceptor  warrants,  when  the 
bill  was  indorsed  before  acceptance,  that  the  payee  was  co!rip(4ent 
to  indorse.  To  insure  negotiable  securities  a  ready  circulation,  a 
person  may  not  dispute  the  power  of  another  to  indorse  an  instru- 
ment, when  he  asserts  by  the  instrument  which  he  issues  to  the 
world  that  the  other  has  such  power.  The  drawer  of  the  bill,  on 
his  putting  it  into  circulation,  holds  out  to  all  the  world  that  there 
is  such  a  payee  as  is  described  in  the  instrument,  and  that,  having 
made  the  instrument  payable  to  such  payee's  order,  the  payee  on  his 
part  may  order  the  instrument  paid  to  some  one  else  in  turn.  When 
the  drawee  accepts  the  bill,  he  assents  to  these  two  propositions,  and 
to  the  proposition,  especially,  that  the  payee  is  competent  to  indorse. 
Hence  the  acceptor  may  not  say  that  the  payee  was  an  infant,  or  an 
insane  person,  or  a  bankrupt,  or  a  corporation  without  legal  exist- 
ence. 'Indeed,"  says  Mr.  Daniel,  "there  could  be  no  reason  why  the 
acceptor  should  be  interested  to  show  that  the  payee  was  incompe- 
tent to  make  the  order,  for  he  has  been  guarantied  in  that  regard  by 
the  drawer,  and  may  charge  the  amount  in  account  against  him, 
whether  the  payee  were  competent  or  not."  ^^ 

IB  GRANT  V.  ELLICOTT,  7  Wend.  (N.  T.)  227;  Harger  v.  Worrall.  f59  N.  Y. 
370;  HEUERTEMATTE  v.  MORRIS,  supra;  Canadian  Bank  of  Commerce  v, 
Coiimbe.  47  Mich.  358.  11  N.  W.  196. 

16  CHARLES  v.  MARSDEN,  1  Taunt.  224. 

17  Daniel,  Neg.  Inst  §  536. 


§71)  FACTS    WHICH    THE    ACCEPTOR    DOES    NOT    ADMIT.  151 


FACTS  WHICH  THE  ACCEPTOR  DOES  NOT  ADMIT. 

71.  An  acceptance  does  not  admit: 

(a)  That  the   payee's   or  subsequent  indorsements 

are  genuine. 

(b)  That  all  the  terms  contained  in  the  bill  at  the 

time  of  acceptance  are  genuine." 

The  rules  of  the  acceptor's  estoppel,  as  we  have  seen,  are  based 
upon  the  supposed  negligence  of  the  drawee  in  failing,  by  an  ex- 
amination of  the  signature  when  the  bill  is  presented,  to  detect  the 
forgery  of  the  drawer's  name,  and  to  refuse  payment.  The  drawee 
should  be  supposed  to  know  the  handwriting  of  the  drawer,  who  is 
usually  his  customer  or  correspondent,  and,  as  betw^een  him  and  an 
innocent  holder,  the  drawee  from  his  imputed  negligence  should  bear 
the  loss.  But  here  the  courts  stop.  It  is  only  the  facts  pertaining 
to  the  drawer,  such  as  his  existence,  capacity,  and  authority,  that 
the  drawee  can  be  reasonably  presumed  to  be  familiar  with.  But 
of  the  payee's  indorsement,  aside  from  his  competency  to  indorse, 
he  can  know  nothing.^*  Nor  is  there  any  reason  why  the  acceptor 
should  know  that  the  body  of  the  bill  is  in  the  drawer's  handwrit- 
ing, or  in  any  handwriting  known  to  the  acceptor.  If  the  alteration 
or  forgery  committed  is  that  of  the  payee's  name,  or  consists  in  al- 
tering the  date  or  amount  of  the  bill,  there  is  no  reason  why  the  ac- 
ceptor should  be  better  able  than  the  indorsers  to  detect  an  alter- 
ation or  forgery.  The  forgery  being  in  the  body  of  the  bill,  or  in 
the  payee's  signature,  the  greater  negligence  here  is  chargeable  upon 
the  party  who  received  the  bill  from  the  perpetrator  of  the  forgery.*" 

18  This  rule  probably  applies  to  the  acceptor  supra  protest. 

18  IIOLT  V.  ROSS,  54  N.  Y.  474.  The  general  rule  is  that  the  acceptor 
admits  the  handwriting  of  the  drawer,  but  not  of  the  Indorsers,  and  the  holder 
is  bound  to  know  that  the  previous  indorsements,  including  that  of  tlie  payee, 
are  In  the  handwriting  of  the  parties  whose  names  appear  upon  the  bill.  And, 
If  It  should  appear  that  one  of  them  is  forged,  he  cannot  recover  against  the 
acceptor,  although  the  forged  name  was  on  the  bill  at  the  time  of  ucccptjinee. 
Taney,  C.  J.,  in  HOUTSMAN  v.  HEXSIIAW,  11  How.  177. 

20  liANK  OF  COiMMEIlCE  v.  UNION  BANK,  3  N.  Y.  230;  WHITE  V. 
BANK,  64  N.  Y.  C20;  YOUNG  v.  GROTE,  4  Ring.  253.  In  this  cn.sp  pialntKT 
left  with  his  wife  checks,  signed  In  blank,  on  defendant's  hank.     One  \V.,  ut 


152  OF  THB    NATURE   OF   THE    LIABILITIES    OF   THE    PARTIES.       (Ch.  5 

The  result  of  the  foregoing  rule  is  that,  if  the  signature  of  the  payee 
or  of  the  indorser  be  forged,  the  acceptor  will  not  be  bound  to  pay 
the  bill  to  any  one  who  traces  title  through  such  indorsements. 
And,  if  he  has  gone  so  far  as  to  pay  the  bill  to  any  one  holding  it 
under  such  forged  indorsement,  he  may,  as  a  general  rule,  recover 
back  the  amount.  So,  also,  if  the  bill  has  been  altered  so  as  to 
purport  to  bind  the  drawer  for  a  larger  sum  or  in  a  different  man- 
ner than  in  the  original  bill,  he  will  not  be  bound  to  pay  the  bill. 
And,  if  the  bill  is  paid,  he  may  in  the  same  way  recover  back  the 
money  paid  upon  it.'* 

ACCEPTOR  SUPRA  PROTEST. 

72.  The  nndertaking  of  the  acceptor  supra  protest  Is  anal- 
ogous to  that  of  the  indorser. 

73.  To  consummate  the  liability  of  the  acceptor  supra 
protest,  it  is  necessary  to  take  three  steps: 

(a)  To  present   the   bill   at    maturity  to    the    original 

dra-wee. 

(b)  Upon  refusal   of  the   original   drawee  to  pay,   to 

protest  for  nonpayment. 

(c)  To  present  the   bill  for   payment  to   the  acceptor 

supra  protest. 

The  foregoing  doctrines  are  common  among  the  text  writers,  and 
are  probably  the  positions  which  would  be  taken  on  the  subject  by 
the  courts.  The  cases,  however,  involving  questions  of  such  accept- 
ances, are  not  many,  and  the  rules  relating  to  them,  therefore,  not 
established.*  The  meaning  and  process  of  an  acceptance  supra  pro- 
test have  already  been  explained.'*     As  a  contract,  it  is  an  undertak- 

the  wife's  request,  filled  out  a  check  for  a  certain  amount,  but  In  such  a  way 
that  the  amount  could  be  raised  without  possibility  of  detection.  After  show- 
ing check  to  the  wife,  W.,  without  authority,  raised  the  value  of  the  check 
and  secured  the  amount  from  defendant  It  was  held  that  due  care  was  not 
taken  In  filling  out  the  check,  and,  since  the  negligence  was  the  plaintiff's,  he 
alone  must  suffer. 

^1  HOLT  V.  ROSS,  54  N.  Y.  479;   WHITE  T.  BANK,  64  N.  Y.  316. 

•  Of.  Neg.  Inst.  L.  §§  280-289. 

2  2  See  pages  101-103,  supra. 


§§  72-73)  ACCEPTOR    SUPRA    PROTEST.  153 

ing  to  pay  on  pregentment  if  the  original  drawee,  npon  a  presentment 
to  him,  should  persist  in  dishonoring  the  bill,  and  such  dishonor  by 
him  be  notified  by  protest  to  the  person  who  has  accepted  for  honor." 
It  is  thus  not  like  the  contract  of  the  acceptor, — an  absolute  engage- 
ment to  pay  at  all  events, — but  only  a  collateral  conditional  engage- 
ment to  pay  if  the  drawee  does  not.  Hence  the  reason  of  the  giving 
of  the  acceptance  requires  a  second  resort  to  the  drawee  when  the 
bill  is  in  the  hands  of  the  holder  under  an  acceptance  supra  protest, 
and  a  further  protest  for  nonpayment  by  such  drawee,^*  It  might 
happen  that  in  the  meantime  effects  would  reach  the  drawee,  who 
had  refused  in  the  first  instance,  out  of  which  the  bill  might  and 
would  be  satisfied,  if  again  presented  to  the  drawee  when  the  period 
of  payment  arrived.  "An  acceptance  for  honor,"  said  Lord  Tenter- 
den,'"*  "is  to  be  considered  not  as  absolutely  such,  but  in  the  nature 
of  a  conditional  acceptance.  It  is  equivalent  to  saying  to  the  holder 
of  the  bill:  Tveep  the  bill.  Don't  return  it.  And  when  the  time 
arrives  at  wcich  it  ought  to  be  paid,  if  it  be  not  paid  by  the  party  on 
whom  it  was  originally  drawn,  come  to  me,  and  you  shall  have  the 
money.'  This  appears  to  me  to  be  a  very  sensible  interpretation  of 
the  nature  of  acceptances  for  honor,  where  the  parties  say  nothing 
upon  the  subject."  The  courts  thus  clothe  with  language  and  in- 
terpret the  intention  of  the  acceptor  supra  protest  in  giving  an  ac- 
ceptance and  of  the  holder  in  receiving  it. 

Upon  the  refusal  of  the  original  drawee  to  pay  the  bill  and  its  pro- 
test, it  may  or  may  not  be  paid  by  the  acceptor  for  honor.  If  it  is 
paid  by  him,  it  seems  clear  that  he  can  pay  only  for  the  honor  of  the 
party  for  whose  honor  he  accepted.f  But  unless  some  party  or  par- 
ties are  specified  in  the  acceptance  supra  protest,  the  courts  construe 

2»  HOARE  V.  CAZENOVE,  16  East,  391.  In  this  case  it  was  held  that  the 
acceptors  of  a  forei^  bill  of  exchange,  who,  after  presentment  to  drawees 
and  refusal  to  accept,  and  protest  for  nonacceptance,  accept  the  same  for  the 
honor  of  the  first  Indorsers,  are  not  liable  on  such  acceptance  unle.ss  there  has 
been  a  presentment  to  the  drawees  for  the  payment  and  a  protest  for  non- 
pay  men  L 

^«  SCIIOFIELD  V.  BAYARD,  3  Wend.  (N.  Y.)  48S;  Lenox  T.  Leverett,  10 
Mass.  1. 

2  6  WILLIAMS  r.  GERMAINE,  7  Bara.  &  0.  46a. 

t  Chalm.  Billa  &  N.  art  242,  aote. 


154  OF    THE    NATURE    OF    THE    LIABILITIES    OF    THE   PARTIES.       (Ch.    6 

the  acceptance  as  made  for  the  honor  of  the  drawer."  Payments 
of  this  kind  do  not,  like  a  single  payment  by  the  original  drawee,  oper- 
ate as  a  satisfaction  of  the  bill,  but  themselves  transfer  the  holder'» 
rights  to  the  party  paying.*^  For  example,  if  the  payment  is  made 
for  the  honor  of  a  particular  indorser,  the  party  paying  may  sue  such 
indorser  and  all  parties  prior  to  him  to  whom  he  could  have  resorted.^* 
If  he  pays  for  the  honor  of  the  bill  generally,  it  is  the  same  as  pay- 
ment for  honor  of  the  last  indorser,  and  he  may  recover  against  all 
parties  to  the  bill.^^  But  if  the  bill  is  not  paid  by  the  acceptor  supra 
protest,*  then  the  rule  for  recovery  against  him  laid  down  by  Lord 
Tenterden '"  is  generally  applied,  and  the  reasons  for  it  accepted  as 
the  true  ones.  "Whatever  is  requisite  to  enable  a  person  who  has 
accepted  a  bill  for  honor  of  another  to  call  upon  that  person  to  repay 
him,  and  to  enable  him  to  recover  over  against  such  person,  may  alsa 
be  reasonably  held  necessary  to  enable  another  party  to  recover 
against  such  an  acceptor  for  honor.  For,  if  you  could  recover  against 
an  acceptor  for  honor  by  proof  of  less  than  will  enable  him  to  recover 
against  the  party  for  whom  he  accepts,  there  would  be  an  inconsist- 
ency. For  it  might  be  said  with  some  reason  that,  if  the  acceptor  for 
honor  chose  to  pay  without  requiring  all  the  proof  from  the  holder 

»«  Chit.  Bills.  387. 

»T  Smith  V.  Sawyer,  55  Me.  141;  VANDBWALL  v.  TYRRELL,  1  Moody  & 
M.  87.     As  to  payment  supra  protest,  see  post,  p.  300. 

28  MERTENS  V.  WINNINGTON,  1  Esp.  112.  In  this  case  It  was  claimed 
by  the  defense  that,  where  a  bill  is  talien  up  for  the  honor  of  any  of  the 
parties  whose  names  are  on  It,  only  such  person  is  liable.  It  was  held  that, 
in  such  case,  the  party  so  taking  up  the  bill  may  be  considered  as  an  indorsee 
paying  full  value,  and  consequently  entitled  to  all  remedies  which  an  indorsee 
is  entitled  to,  and  to  sue  all  parties  to  the  bill. 

2  8  Fairley  v.  Roch,  Lutw.  891.  In  Ex  parte  LAMBERT  It  was  held  that 
where  a  bill,  accepted,  being  dishonored,  was  taken  up  for  the  honor  of  the 
drawer  by  A.,  the  latter  had  a  clear  right  as  against  the  drawer.  He  had  a 
right  to  stand  in  the  place  of  the  drawer;  but  he  could  not  make  a  title 
stronger  than  that  of  the  drawer,  thus  ousting  the  assignees  of  the  bankrupt 
drawees  of  the  defense  which  they  would  have  against  him.  13  Ves.  179;  Ex 
parte  Wyld,  30  Law  J.  Bankr.  10. 

♦  "When  a  bill  of  exchange  is  dishonored  by  the  acceptor  supra  protest  It 
must  (probably)  be  again  protested  in  order  to  charge  th©  other  parties  liable 
thereon."     Chalm.  Bills  &  N.  art.  187. 

«o  WILLIAMS  V.  GERMAINE,  7  Barn.  &  C.  468. 


§§  72-73)  ACCEPTOR  SUPRA  PROTEST.  155 

which  would  be  necessary  for  him  to  recover  upon,  tlie  payment 
would  be  made  in  his  own  wrong,  and  he  would  not  be  entitled  to 
recover  over.  It  seems,  therefore,  that  the  same  rule  as  to  proof  which 
prevails  in  the  case  of  an  acceptor  for  honor  in  suing  the  party  for 
whose  honor  he  accepts,  must  also  be  observed  when  the  holder  of 
a  bill  sues  the  person  so  accepting."  This  means,  if  we  may  be  par- 
doned in  amplifying  the  words  of  so  great  a  judge,  that,  in  prose- 
cuting the  acceptor  supra  protest,  the  steps  are  each  to  be  demon- 
strated which  fix  the  rights  and  liabilities  of  the  parties.  In  the  first 
place  it  is  necessary  to  show  the  right  of  the  acceptor  supra  protest 
to  so  accept.  This  is  shown  by  pleading  and  proving  if  such  be  the 
case  that  the  bill  was  first  presented  to  the  drawee  for  acceptance,  but 
that  its  acceptance  was  refused  and  that  thereupon,  the  bill  being  pro- 
tested, the  acceptance  supra  protest  was  made.  The  contract  of  the 
holder  at  this  juncture  is  construed  to  be  that  he  and  subsequent  par- 
ties have  a  right  to  collect  the  bill  of  the  acceptor  supra  protest,  pro- 
vided the  bill  is  not  paid  w'hen  due  by  the  drawee, — the  legal  situation 
of  the  prior  parties  remaining  unchanged  until  the  liabilities  and 
rights  under  the  instrument  are  finally  fixed  at  the  time  of  the  presen- 
tation of  the  instrument  for  payment.  At  this  time  the  holder  who 
has  obtained  the  acceptance  supra  protest,  or  subsequent  holders,  for 
the  reasons  we  have  given,  must  present  the  instrument  for  payment 
to  the  drawee,  and  if  payment  is  refused  again  protest  it  and  then 
present  it  to  the  acceptor  supra  protest  for  payment.  At  this  junc- 
ture the  rights  of  the  parties  are  that  the  holder  who  obtained  the 
acceptance  supra  protest  and  all  parties  subsequent  to  him  have  the 
right  to  enforce  payment  against  the  acceptor  supra  protest  upon 
pleading  and  proving  the  foregoing  facts  of  the  first  and  second  pre- 
sentment, protest,  and  notice.*^  It  is  probably  the  doctrine  that  they 
may  also  enforce  the  bill  against  parties  prior  to  the  time  of  the  ac- 
ceptance supra  protest  ujion  the  foregoing  fact  of  the  protest  for  non- 
acceptance  The  acceptor  supra  protest,  if  he  pays  the  bill,  is  then 
not  only  subrogated  to  the  rights  of  parties  to  the  bill  whom  he  pays, 
but  also  may  recover  both  from  the  parties  for  whose  honor  he  ha& 
accepted,  and  from  all  parties  antecedent  to  them,  all  damages  he  may 
have  incurred  by  reason  of  his  acceptance.     But  to  do  so  he  must 

«i  BARINf;  V.  CI^RK,  19  Pick.  (Mass.)  220;  Gazzam  Y.  Armstiouij,  3  Duna 
(Ky.)  554;    Wood  V.  Pugli,  7  Ohio,  pt  2,  p.  15(J. 


156  OF    THK    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.        (Cll.    5 

plead  and  prove  all  the  facts  upon  wliich  his  liability  rests."'  There 
seems  to  be  no  reason  from  the  equities  of  the  case  why  the  acceptor 
supra  protest  should  not  be  subject  to  the  estoppels  which  are  implied 
in  the  acceptance  of  an  ordinary  acceptor.  And  although  there  is 
conllictiug  authority  it  has  been  held  that  they  are  the  same.""  He 
intends  to  assume  by  his  act  the  liability  of  an  acceptor,  and  his  lia- 
bility would  probably  be  held  by  the  courta  to  be  the  same  were  ques- 
tions of  this  character  often  coming  before  them  for  decision.  But 
the  rule  thus  laid  down  has  been  but  little  discussed,  and  this  enunci- 
ation of  them,  therefore,  is  rather  speculative  than  positive. 

DRAWER  AND  INDORSER. 

74.  Every  draxv^er  promises  the  payee  and  subsequent 
holders,  and  every  indorser  promises  his  indorsee  and 
subsequent  holders,  that  if  the  bill  or  note  is  presented 
for  payment  to  the  dra-vsree,  acceptor,  or  maker,  and  pay- 
ment demanded  and  refused,  and  the  necessary  proceed- 
ings on  dishonor  be  taken,  he  'will  indemnify  the  holder 
for  loss. 

75.  The  dra-wer  of  a  bill  of  exchange  promises  the  pay- 
ee and  subsequent  holders,  and  the  indorsers  before  ac- 
ceptance promise  subsequent  holders,  that  if  on  due  pre- 
sentment the  bill  be  not  accepted,  and  necessary  pro- 
ceedings on  dishonor  be  taken,  he  ■will  indemnify  them 
for  loss." 

76.  The  liability  of  the  dra-wer  and  of  each  indorser  is 
several  from  that  of  all  the  other  parties  to  the  instru- 
ment. 

«2  SCHOFIELD  r,  BAYARD.  3  Wend.  491;  Ex  parte  Wackerbarth.  5  Ves. 
574;   HOARE  v.  CAZENOVE,  16  East,  391;  Byles,  Bills,  pp.  267,  271. 

««  Goddard  v.  Merchants'  Bank,  4  N.  Y,  147;  Salt  Springs  Bank  v.  Syra- 
cuse Savings  Inst,  62  Barb.  101.     See.  contra,  WILKINSON  v.  JOHNSON,  3 

Barn.  &  C.  428.     But  see  PHILLIPS  v. THURN,  L.  R.  1  C.  P.  463.  holding 

that  it  admits  the  drawer's  signature  alone.     18  C.  B.  6^ 

«♦  These  propositions  axe  adopted  from  Ames,  Bills  &  N.  p.  817.  Cf.  Neg. 
Inst  L.  §§  111.  Ua. 


§§  74-76)  DRAWER    AND    INDORSER.  157 

In  the  chapter  relating  to  ''Indorsement"  the  student  was  intro- 
duced to  two  of  the  ideas  embodied  in  the  principal  text  The  first 
was  that  an  indorsement  was  a  contract  separate  and  apart  from 
that  evidenced  by  the  terms  set  forth  on  the  face  of  the  paper.  The 
second  was  that  in  addition  to  these  terms  so  set  forth  it  was  a  con- 
tract in  which  the  law  itself  implied  others  equally  important.*"  The 
terms  last  spoken  of  consist  of  certain  conditions  precedent  to  the 
right  of  its  enforcement  as  a  contract  of  indemnity,  which  were  pre- 
sentment fcr  acceptance  to  the  drawee  or  for  payment  either  to  the 
acceptor  of  the  bill  oi'  the  maker  of  the  note,  and  in  case  of  its  dis- 
honor then  that  due  notice  of  that  fact  should  be  given  the  indorser. 
In  the  chaptt^r  relatii^g  to  "Acceptance,"  and  in  a  foregoing  section 
of  this  chaptei',  the  student  was  further  introduced  to  the  idea  that 
the  liability  of  the  drawer  is  a  shifting  one.  Before  acceptance  he 
is  the  party  primarily  liable;  after  acceptance  he  is  the  party  sec- 
ondarily liable,  his  position  being  that  substantially  of  an  indorser, 
and  subject  to  the  rules  we  have  just  stated.  In  a  later  section  of 
thia  wor.i  we  shiill  show  that  presentment  for  acceptance  by  a  holder 
is  not  vital  to  the  life  of  his  various  contracts  with  the  other  parties  to 
the  bil^  It  is  only  for  his  better  security.  And  although  the  holdt-r 
of  a  bill,  by  its  nonacceptance,  may  acquire  a  right  of  action  against 
the  drawer  and  indorsers  prior  to  himself,  it  is  not  absolutely  nec- 
essai*y  for  him  to  do  so.*®  These  facts  being  explained,  it  leaves  little 
to  be  said  about  the  principal  text.  In  fact,  the  principal  text  is  set 
out  mainly  that  the  student  may  fix  its  statements  in  mind  by  way 
of  contrast  to  the  contract  of  the  maker  and  acceptor. 

There  are,  however,  two  points  to  be  noticed.  They  are  that  the 
liability  of  the  drawer  and  indorser  is  in  most  respects  identical,  and 
that  their  liability  is  several.  "There  is  no  distinguishing  the  case 
of  an  indorser  from  that  of  the  drawer,"  said  Lord  Ellenborough,*^ 
"it  having  been  long  ago  decided  that  every  indorser  is  in  the  nature 
of  a  new  drawer,  every  indorsement  as  a  new  bill,  and  that  the  in- 
dorser stands  to  his  indorsee  in  the  law  merchant  the  same  as  the 
drawer."    With  both  drawer  and  indorser  a  distinct  bill  is  drawn. 

«B  See.  also,  CASTRIQUE  v.  BUTTIGIEG.  10  Moore.  P.  C.  Cns.  94. 
»«  Walker  v.  Stetson.  19  Ohio  St.  400,  Johns.  Cas.  Bills  &  N.  89;    Cashmau 
T.  Harri.son,  90  Cal.  297.  27  Pac.  283;   Id..  Johns.  Cas.  Bills  &  N.  104. 
«T  BALLIXGALLS  v.  GLOSTER,  3  East.  48L 


t58  OF    THIC    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.        (Ch.   5 

With  tho  diawtT,  the  contract  is  between  himself  and  the  payee;  with 
the  indorser,  between  himself  and  his  indorsee,  the  indorser  standing 
in  the  place  of  the  drawer,  the  remedy  of  the  indorsee  being  first 
against  his  immediate  indorser  and  then  against  the  original  drawer 
as  the  assignee  and  standing  in  the  place  of  the  indorser.  In  this 
resjx^ct  the  case  of  the  promissory  note  when  once  indorsed  and  the 
hill  of  exchange  are  parallel.  In  the  case  of  the  promissory  note 
before  indorsement  the  contract  is  only  a  promise  to  pay,  but  after 
indorsement  it  becomes  an  order  by  the  indorser  upon  the  maker  of 
the  note  to  pay  the  debt  of  the  maker  transferred  to  indorser,  and 
again  by  him  as  indorser  transferred  to  his  indorsee. 

The  difference  between  bills  and  notes  is  therefore  in  this  respect 
but  of  words,  the  indorser  of  a  promissory  note  being  almost  the  same 
as  the  drawer  of  the  bill  of  exchange.^*  It  is  partly  this  reason  and 
partly  the  business  one  that  the  drawer  and  indorser  may  protect 
themselves,  the  drawer  by  withdrawing  his  effects  from  the  hands 
of  the  acceptor,  the  indorser  by  taking  steps  against  parties  prior  to 
him,  that  are  the  foundations  of  the  rule  that  both  drawer  and  in- 
dorser are  entitled  to  the  prior  presentment  and  protest  and  notice.*® 

88  HEYLYN  V.  ADAMSON,  2  Burrows,  GOO.  In  this  case  it  was  held  "that 
in  actions  upon  inland  bills  of  exchange,  by  an  indorsee  against  an  indorser, 
the  plaintiff  must  prove  a  demand  of,  or  due  diligence  to  get  the  money  from, 
the  drawee  (or  acceptor),  but  need  not  prove  any  demand  of  the  drawer;  and 
that.  In  actions  upon  promissory  notes  by  an  Indorsee  against  the  Indorser, 
the  plaintiff  must  prove  a  demand  of,  or  due  diligence  to  get  the  money  from, 
the  maker  of  the  note." 

89  RLESAKD  V.  HIRST,  5  Burrows,  2G70.  This  was  a  case  where  an  Inland 
bin  made  payable  to  one  was  by  him  indorsed  to  a  third  party  who  tendered 
It  for  acceptance  and  was  refused,  and  who  then  kept  It  for  some  time  without 
giving  notice  of  the  refusal.  It  was  held  that  the  third  party  should  have 
given  notice,  and  that  by  failing  to  do  so  he  took  the  risk  upon  himself,  as  the 
indorser  of  the  bill  was  imposed  upon.  The  person  who  neglected  to  give 
notice  should  suffer  for  it.  In  the  case  of  COLLOTT  v.  HAIGH,  a  bill  drawn 
by  defendant  upon  J.  D.  and  accepted  by  him  for  defendants'  accommodation, 
was  Indorsed  to  plaintiffs.  Upon  maturity,  time  was  given  to  J.  D.  in  con- 
sideration of  his  giving  security  to  plaintiffs,  which  security  proved  not  to 
be  available.  It  was  held  that  such  granting  of  time  to  the  acceptor  did  not 
discharge  the  defendant,  and  he  could  not  defend  himself  on  that  ground,  or 
for  want  of  notice,  as  the  bill  was  for  his  accommodation.  3  Camp.  281 
GALE  V.  WAI^H,  5  Term  R.  239;  ANIBA  v.  YEOMAiSIS,  39  Micli.  171; 
Newberry  v.  Trowbridge,  13  Mich.  263. 


I    77)  UNDERTAKING    OF    DRAWER.  159 

It  is  also  the  reason  of  the  estoppels  discussed  in  the  next  succeeding 
sections  applying  to  drawer  and  indorser  alike.  And  it  may  be 
stated  generally,  and  the  student  must  fix  it  in  his  mind,  that  the 
doctrines  of  the  contract  of  the  draw'er  are  the  doctrines  of  the  con- 
tract of  the  indorser,  because  they  are,  in  their  legal  effect,  one. 

The  second  point  to  be  fixed  in  the  mind  is  the  character  of  the 
contract  of  the  drawer  and  of  each  indorser  as  several  from  that  of 
-every  other  party  to  the  contract.  It  naturally  follows  that,  so  long 
as  the  promises  of  the  drawer  and  indorser  are  separate  and  inde- 
pendent, they  must  always  be  separate  in  the  liability  incurred  under 
them.  The  indorsee  enters  into  a  contract  with  his  immediate  party 
from  whom  he  got  the  bill  and  who  indorsed  it  to  him.  Every  prior 
indorser  on  the  bill,  by  virtue  of  his  indorsement,  makes  a  promise 
to  each  new  indorsee.  If  A,  B,  C,  and  D  are  indorsers  on  a  nego- 
tiable instrument,  A  makes  separate  promises  to  do  certain  things 
with  B,  C,  and  D;  B  with  C  and  D;  and  so  on.  Each  makes  a  sep- 
arate promise  with  every  individual  who  comes  after  him  on  the  in- 
strument. The  liability  of  each  indorser  is  in  legal  phrase  several 
from  that  of  all  other  parties  to  the  instrument.  Under  the  old  com- 
mon-law rule  this  meant  that  the  holder  might  sue  the  parties  to  the 
instrument  one  at  a  time,  or  he  might  sue  separate  indorsers  in  sepa- 
rate actions  at  the  same  time.  But  if  any  one  of  these  indorsers  thus 
sued  should  pay  the  instrument  the  claim  of  the  holder  against 
each  upon  it  was  satisfied.*"  It  is  now  generally  settled  by  statute 
throughout  the  Union  that  all  the  parties  to  the  instrument  may  be 
jointly  sued  upon  their  several  liability,  or  one  or  more  may  be  sued 
at  separate  times.* 

UNDERTAKING  OF  DRAWER. 

77.  The  draTver  of  a  bill  before  acceptance  undertakes 
with  the  payee  and  subsequent  holders: 

(a)  That  there   is  a  dravree,  and  that  he  is  capable  of 

accepting. 

(b)  That  he  -will  accept. 

«o  ChlL  Bills.  538.  .«9;   Daniel,  Neg.  Inst.  8  1203. 

•  As  to  the  American  statutes,  see  Rand.  Com.  Taper,  S  1C69. 


160  OF   THE    NATURE    OF    THE    LIABILITIES   OF   THB    PARTIES.       (Ch.  5 

When  the  drawer  issues  a  bill  to  the  world,  he  undertakes  two 
things.  One  is  that  the  situation,  nature,  or  character  of  the  drawee 
is  mich  that  the  bill  can  be  accepted;  and  the  other  is  that  the  drawee, 
upon  presentment,  will  accept  the  bill.  The  legal  interpretation  of 
the  words  on  the  face  of  the  bill  indicating  the  place  of  presentment 
to  the  drawee,  as,  "To  John  Smith,  at  Baring  Bros.,"  is  that  the 
diawjT  contracts  that  the  drawee  may  be  found  at  that  place,  and 
the  bill  presented  to  him  there.* ^  Thus,  in  case  of  a  bill  *^  drawn 
on  Paris,  where  the  French  convention  had  passed  a  decree  prohibit- 
ing the  payment  of  bills  drawn  in  any  country  at  war  with  Fiance, 
the  court  so  applied  the  rule  that  ultimately  the  loss  should  not  fall 
upon  the  payee  or  indorser,  but  upon  the  drawer  who  issued  the  bill, 
who,  it  is  to  be  inferred,  was  deemed  to  warrant  that  the  situation 
of  affairs  would  be  such  that  the  bill  could  be  presented  for  accept- 
ance. If  this  turned  out  not  to  be  the  case,  then  the  drawer  must 
bear  the  loss.  This  loss  to  be  borne  by  him  consists  of  all  loss  incur- 
red, such  as  re-exchange,  notarial  expenses,  and  other  damage  *^  nec- 
essarily incidental  to  the  failure  to  obtain  the  acceptance,  because 
the  party  taking  the  bill  was  obliged  to  make  these  expenditures  to 
collect  the  bill,  and  if  the  drawer's  contract  was  broken,  and  such 
collection  failed,  the  drawer  must  reimburse  such  party.**    The  holder 

*i  Edw.  Neg.  Inst.  §§  530-534;   Wing  v.  Terry,  5  Hill  (N.  Y.)  160. 

4«  MELLISH  V.  SIMEON,  2  H.  Bl.  378. 

*»  AURIOL  V.  THOMAS,  2  Term  R.  52.  In  this  case  a  bill  of  exchange, 
2,800  star  pagodas,  payable  to  defendant  or  order,  and  directed  to  G.  M., 
Madras,  was  indorsed  to  plaintiffs,  who  discounted  it  at  the  rate  of  exchange, 
68.  6d.  per  pagoda.  On  sending  the  bill  to  Madras  It  was  returned  protested 
for  nonacceptance  and  nonpayment.  The  plaintiffs  recovered  10s.  per  pagoda 
and  £5  per  cent,  after  end  of  30  days'  notice  to  defendant.  Such  recovery 
was  held  not  usurious,  as  it  was  proved  to  be  the  usual  custom  In  case  of 
such  bills,  as  such  recovery  included  charges  of  exchange  and  other  Incidental 
expenses  as  well  as  legal  Interest.  In  GANTT  r,  MACKENZIE,  a  bill  of 
exchange  was  presented  for  acceptance  and  refused,  April  17,  1809,  and  was 
presented  for  payment  on  the  19th  of  June  of  the  same  year.  It  was  decided 
that  the  holder  was  entitled  to  £10  per  cent  as  damages,  and  Interest  was  to 
be  allowed  from  the  time  of  presentation  for  payment  3  Camp.  51.  In  Mel- 
lish  y.  Simeon,  it  was  held  that  where  the  holder  has  been  guilty  of  no  de- 
fault, the  drawer  is  answerable  for  the  amount  of  the  bill,  and  also  for  the 
re-exchange  which  is  a  consequence  of  the  bill  not  being  paid.     2  H.  Bl.  378. 

**  Byles,  Bills,  402;  Daniel,  Neg.  Inst  i  1445;  and  Weldon  v.  Buck,  1 
Johns.  444. 


§  77)  UNDERTAKING    OF   DRAWER.  161 

of  a  bill,  whom  it  reaches,  in  the  course  of  its  circulation,  may  present 
the  bill  to  the  drawee;  and,  if  he  refuses  to  accept,  although  the  bill 
is  not  due,  the  holder  may  at  once  turn  and  hold  the  drawer,  in- 
dorsers,  and  all  parties  upon  the  bill  prior  to  himself.  The  reason 
of  this  is  to  guaranty  the  circulation  of  bills,  by  preventing  the  drawer 
from  withdrawing  funds  from  the  hands  of  the  drawee  before  the 
bill  is  presented,  and  also  to  assure  the  holder  that,  if  anything  is 
wrong  between  the  drawer  and  drawee,  and  the  drawee  refuses  to 
accept,  he  may  at  once  turn  for  reimbursement  to  the  parties  through 
whom  the  bill  has  been  circulated,  and  who  treated  it  as  the  equiva- 
lent of  cash,  and  were  paid  money,  each  in  turn,  for  it.**  The  further 
effect  of  this  rule  will  be  considered  in  the  chapter  on  "Presentment." 
The  courts  speak  of  this  legal  relation  of  the  drawer  as  a  stipula- 
tion or  part  of  the  contract  rather  than  as  an  estoppel.  This  is  be- 
cause the  reason  of  the  rule  is  somewhat  different  from  that  which 
is  the  basis  of  the  estoppels  of  the  acceptor.  It  is  argued  that  the 
main  purpose  of  the  contract  between  the  drawer,  on  the  one  hand, 
and  the  payee  and  person  to  whom  he  transfers  his  rights,  on  the 
other,  is  to  remit  money.  For  this  purpose  the  payee  and  subse- 
quent holders  pay  valuable  consideration.  To  effect  this  purpose,  the 
drawer,  on  his  part,  agrees  that  the  money  shall  be  paid  at  the  time, 
place,  and  by  the  person  nominated  in  the  bill.  Of  the  very  essence 
of  this  agreement,  therefore,  is  the  fact  that  the  drawee,  who  may 
be  a  stranger  to  the  payee  or  subsequent  holder,  should  be  found  in 
the  place  where  he  is  described  to  be.**  Otherwise,  it  would  be  the 
duty  of  the  holder  to  search  the  world  over  for  the  person  to  pay 
him  in  turn  the  money  he  had  paid  the  drawer.  It  is  also  of  its  essen- 
tial nature  that  the  drawee  shall  have  funds  in  his  hand  to  warrant 
his  accepting,  or  that  he  accepts  from  some  other  consideration,  im- 
material to  the  payee,  perhaps,  but  good  as  between  the  drawer  and 

40  BALLINGALLS  V.  GLOSTER,  3  East,  481;  Mason  v.  Franklin.  3  Johns. 
202;  Weldon  v.  Buck,  4  Johns.  144;  Miller  v.  Hackley,  5  Johns.  375;  BA.NK  OF 
ROCHESTER  V.  GRAY,  2  Hill,  227. 

49  De  Wolf  V.  Murray,  2  Sandf.  166;  HINE  v.  ALLELY,  4  Barn.  &  Add. 
624.  In  this  case  an  accepted  bill  was  presented  at  the  place  of  payim^nt 
specified  In  the  Instrument,  but  the  house  was  closed.  It  was  objocted  that 
for  this  reason  there  had  been  no  presentment,  but  It  was  held  that  tlio  pri'- 
Bentment  aa  described  was  good.  Buxton  v.  Jones,  1  Man.  &  G.  83;  Pierce  v. 
Struthers,  27  Pa.  St.  249. 
NEG.BILIvS.-ll 


162  OF    THE    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.       (Ch.   5 

drawee.  In  other  words,  as  between  the  drawer  and  payee,  the 
drawee,  though  he  is  designated  as  the  person  to  make  the  payment, 
is  a  mere  agent  of  the  drawer;  and  the  latter,  therefore,  since  he 
undertakes  for  his  agent's  acts,  "undertakes  that  the  acceptance  be 
made  at  all  events."  " 

WARRANTIES  OF  INDORSER. 

78.  Every  indorser  who  indorses  without  qualification 
■warrants  to  his  indorsee  and  to  all  subsequent  holders: 

(a)  That  the  bill  or  note  is,  in  every  respect  and  as  to 

all   prior  parties,    genuine,  and   neither   forged, 
fictitious,  nor  altered. 

(b)  That  the  bill  or  note  is  a  valid  and  subsisting  ob- 

ligation, and  that  the  contract  obligations  of  all 
prior  parties  are  valid. 

(c)  That  the  prior   parties    were   competent    to   bind 

themselves,  whether  as  drawer,  acceptor,  maker, 
or  indorser. 

(d)  That  he,  as  indorser,  has  good  title  to  the  bill  or 

note,  and  also  a  right  to  transfer  it.*^ 

As  we  have  seen,  the  contract  of  the  indorser,  while  it  embodies 
the  terms  of  the  instrument  indoreed,  is  nevertheless  a  distinct  con- 
tract. The  contract  of  the  indorser  includes  a  promise  of  indemnity 
in  case  of  the  dishonor  of  the  instrument,  and  it  also  includes  certain 
so-called  "warranties."  It  must  be  observed,  however,  that  these  war- 
ranties are  implied,  not  from  the  undertaking  of  the  indorser  to  pay 
in  case  of  dishonor,  but  as  incidents  to  the  transfer  or  sale  of  the  bill 
or  note. 

A  warranty  may  be  defined  as  an  agreement  with  reference  to  the 
subject  of  the  contract,  but  collateral  to  its  main  purpose.  Warran- 
ties may  be  express  or  implied,  but  it  is  only  implied  warranties  that 
are  here  in  question.  In  every  contract  of  sale  of  personal  property, 
the  seller  impliedly  warrants  his  right  to  sell  the  goods  unless  the 
circumstances  of  the  sale  or  agreement  to  sell  are  such  as  to  show  that 

*T  Hlbernla  Nat.  Bank  v.  Lacombe,  84  N.  Y.  367. 
«•  Cf.  Neg.  Inst  L.  {  118. 


§  78)  WARRANTIES    OF    INDORSER.  163 

he  is  transferring,  not  the  absolute  property,  but  only  such  property 
or  interest  as  he  may  have,  in  the  thing  sold.  Hence  from  the  in- 
dorser's  transfer  or  sale  of  the  instrument  indorsed  it  follows  that 
he  impliedly  warrants  that  he  has  lawful  title  to  it  and  a  right  to 
transfer  it.  As  a  rule  the  implied  warranties  of  the  seller  of  personal 
property  do  not  extend  beyond  this,  and  he  does  not  warrant  the  qual- 
ity of  the  thing  sold.  It  is  true  that  there  are  certain  exceptions, 
which  arise  in  particular  cases  from  the  nature  of  the  agreement  and 
of  the  thing  sold,  where  the  law  does  imply  a  warranty  of  certain  quali- 
ties, but  these  exceptions  are  mainly  confined  to  contracts  for  the  sale 
of  unascertained  goods, — that  is,  of  goods  which  the  seller  is  to  select 
or  manufacture  and  appropriate  to  the  contract;  and  therefore  these 
exceptions  cannot  apply  to  the  sale  of  a  specific  bill  or  note,  which 
the  buyer  has  an  opportunity  to  inspect.  In  case  of  the  sale  of  spe- 
cific goods,  the  rule  of  caveat  emptor  applies,  and  no  warranty,  strict- 
ly speaking,  except  of  title,  is  implied;  subject,  perhaps,  to  a  single 
exception,  namely,  where  the  seller  is  also  the  manufacturer  or  grower, 
it  has  in  some  cases  been  held  that  a  warranty  is  implied  that  they 
are  free  from  latent  defects  arising  from  the  process  of  manufacture 
or  growth.*®  It  is  obvious,  of  course,  that  this  exception  cannot  apply 
to  the  transfer  of  bills  and  notes.  Upon  the  strict  analogy  of  the  sale 
of  other  personal  property  it  would  follow,  therefore,  that  the  im- 
plied "warranty,"  in  the  proper  sense  of  the  term,  of  the  indorser 
would  be  confined  to  warranty  of  title.  There  is,  however,  another 
principle  governing  the  sale  of  personal  property  which  is  material 
in  this  connection.  WTiere  goods,  even  if  they  be  specific  and  the 
buyer  has  an  opportunity  to  inspect,  are  sold  by  description,  there 
is  an  implied  "condition"  that  the  goods  shall  correspond  with  the 
description.  This  condition  is  sometimes  improperly  called,  and  gen- 
erally so  called  in  the  United  States,  a  "warranty."  But  whether  this 
undertaking  be  called  a  "condition"  or  a  "warranty,"  it  is  the  law 
that  if  the  article  sold  fails  to  conform  to  the  description  the  buyer 
has  a  right  of  action  against  the  seller  for  its  breach.'"  Applying 
this  principle  to  the  sale  of  bills  and  notes,  it  may  fairly  be  said  that 

49  As  to  Implied  warranty  of  quality,  see  BenJ.  Sales,  S  644  et  soq.;  TlfT. 
Sales,  1G7  et  seq. 

00  As  to  sale  by  description,  see  Benjamin,  Sales,  S§  600,  645;  Tiff.  Sulea, 
155.  17L 


1G4  OF    THE    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.       (Cll.   O 

if  the  instrument  for  any  reason  is  invalid  in  its  inception  it  is  not 
what  it  purports  to  be,  a  bill  or  note,  but  a  mere  worthless  piece  of 
paper;  and  in  such  case  the  purchaser  has  a  right  of  action  against 
the  seller  for  breach  of  contract,  based  on  the  failure  of  the  thing  sold 
to  conform  to  its  description."  It  seems  that  this  principle  is  the 
foundation  of  the  so-called  warranties  of  the  indorser  which  are  not 
to  be  cxiilained  by  the  implied  warranty  of  title.  Therefore,  when  it 
turns  out  that  a  note  or  bill  is  forged  or  altered  or  void  for  usury,  or 
that  the  parties  were  infants,  or  that  the  bill  had  been  stolen,  the 
bank  which  has  taken  it,  or  the  party  who  has  accepted  it  in  payment 
for  goods,  may  turn  upon  the  indorsier  who  transferred  it  to  him,  and 
sue  him  upon  his  indorsement.  And,  when  the  indorser  sets  up  any 
of  these  facts  by  way  of  defense,  the  holder  may  answer,  "I  am  suing 
you  upon  a  separate  contract  in  which  you  warranted  these  things 
to  me,"  and  the  courts  conclude  the  indorser  from  such  a  defense. "^^ 

Thus,  in  warranting  the  genuineness  of  the  instrument,  the  indorser 
agrees  that  if  it  cannot  be  enforced  against  the  drawer,  acceptor,  or 
maker,  whose  names  appear  upon  it,  because  these  names  are  forged, 
these  defenses  will  not  avail  him; "'  and  this  rule  also  applies  in  case 
of  prior  indorsements."^*  In  warranting  its  validity  he  agrees  that 
if  the  paper  cannot  be  enforced  against  the  acceptor  or  maker  because 
of  some  illegality  in  its  inception,  for  example  because  it  was  given 
for  a  gaming  debt,""  or  void  for  usury,"^'  or  given  for  other  illegal 

81  Meyer  v.  Richards,  1G3  U.  S.  3S5,  16  Sup.  Ct.  1148;  Daniel,  Neg.  Inst.  § 
733a. 

82  The  liability  for  breach  of  warranty  accrues  at  the  time  of  indorsement, 
and  the  statute  of  limitation  begins  to  run  at  that  date.  BXiETHEN  v.  LOV- 
EUIXG.  58  Me.  437. 

8»  COGGILL  v.  BANK,  1  N.  Y.  113;  Mosher  v.  Carpenter,  13  Hun  (N.  Y.> 
fi04;  TURNBULL  v.  BOWYER.  40  N.  Y.  456;  Meacher  v.  Fort,  3  Hill  (S.  C.) 
227.  and  Riley.  248;  HANNUM  v.  RICHARDSON,  48  Vt  508;  Condon  v. 
Pearce,  43  Md.  83;  York  Co.  M.  F.  Ins.  Co.  v.  BroolvS,  51  Me.  506;  Chase  v, 
Hathorn.  01  Me.  505;   SELSER  v.  BROCK,  3  Ohio  St.  302. 

64  TURNER  V.  KELLER,  66  N.  Y.  66;  OGDEN  v.  SAUNT)ERS,  12  Wheat, 
313;  FISH  v.  BANK,  42  Mich.  204,  3  N.  W.  849;  WILLIAMS  v.  INSTITU- 
TION. 57  Miss.  633. 

8  5  BOWYER  V.  BAMPTON,  2  Strange,  1155,  7  Mod.  334;  Edwards  v.  Dick, 
4  Earn.  &  Aid.  212. 

88  Morford  v.  Davis,  28  N.  Y.  481;  Ingalls  v.  Lee,  9  Barb.  647;  McKNIGHT 
V.  WHEELER,  6  Hill,  492;   Ord,  Usury,  109. 


§  78)  WARRANTIES    OF    INDORSER.  165 

considerations,"^  these  defenses  will  not  avail  him.  In  warranting 
the  competency  of  the  parties  he  agrees  if  the  paper  cannot  be  en- 
forced against  the  original  parties  because  they  were  incapable  of  con- 
tracting because  they  were  married  women,''^  or  because  they  were 
a  copartnership,^^  or  as  an  agent,®"  or  as  a  corporation,*^  that  these 
defeases  will  not  avail  him.  And,  the  reason  being  the  same  in  case 
of  genuineness  and  competency,  it  is  probable  that  this  rule  applies 
also  to  prior  indorsers.®^  In  warranting  title  and  right  to  transfer 
he  agrees  that,  if  the  instrument  cannot  be  enforced  against  the  orig- 
inal parties  because  it  was  lost  by  them  or  stolen  from  them,  these 
defenses  will  not  avail  him,  because  he  held  himself  out  as  having  a 
good  title,  and  therefore  a  right  to  transfer.®^ 

A  thoroughly  consistent  theory,  it  might  be  urged,  would  require 
that  if  the  principal  contract,  set  forth  on  the  face  of  the  instniment, 
is  void  ab  initio,  all  the  subsidiary  contracts  of  indorsement  depend- 
ing upon  it  would  also  be  of  no  legal  effect,  because  they  could  never 
give  life  to  a  contract  which  had  no  existence.  But  even  granting  this 
to  be  so,  yet  legal  theory  is  overruled  by  common  sense.  Besides,  it 
is  not  always  necessary  that  the  principal  contract  to  which  a  col- 
lateral contract  of  guaranty  is  added  should  be  enforced  in  order  that 
the  contract  of  guaranty  may  avail.'*  A  guarantor  can  sometimes 
be  held,  although  no  suit  whatever  can  be  maintained  on  the  original 
debt.  For  it  is  sometimes  the  very  essence  of  a  guaranty  that  it  is 
given  because  the  principal  debt  cannot  be  enforced,  as  in  cases  where 

67  Graham  v.  Maguire,  39  Ga.  531;   Succession  of  Well,  24  La.  Ann.  139. 

8  8  In  the  case  of  ERWIN  v.  DOWNS,  It  was  held  that  the  Indorsement  of  a 
promissory  note  imports  a  contract  that  the  makers  were  competent  to  con- 
tract, and  that  one  who  became  the  holder  of  such  a  note  for  a  valuable  con- 
sideration, before  maturity,  is  not  deprived  of  the  right  to  rely  upon  the 
contract  of  the  indorser,  even  though  such  holder  have  knowledge  that  the 
makers  were  incompetent,  as  being  married  women.  15  N.  Y.  575;  HALY  v. 
LANE,  2  Atk.  181;  Kenworthy  v.  Sawyer,  125  Mass.  28;  Robertson  v.  Allen. 
3  Baxt.  233. 

69  Dalrymple  v.  Hillenbrand,  62  N.  Y.  5. 

«o  Burrill  v.  Smith,  7  Pick.  291. 

81  Kemsen  v.  Graves,  41  N.  Y.  471;  Zalbriskle  v.  Cleveland,  C.  &  C.  R.  Co. 
23  How.  (U.  S.)  399;    Glldden  v.  Chamberlln,  167  Mass.  486,  46  N.  E.  103. 

«2  Daniel,  Neg.  Inst.  §  676;    Lennon  v.  Grauer,  159  N.  Y.  433,  54  N.  E.  11. 

68  FAw.  Neg.  Inst.  §  407;    Daniel,  Neg.  Inst  S  077;.  Rand.  Com.  Paper,  S  755. 
•*  McLaughlin  v.  McGovem,  34  Barb.  208. 


166  OF    THK    NATURK    OF    THE    LIABILITIES    OF    THE    PARTIES.       (Cll.  & 

the  guarantor  undertakes  to  be  responsible  for  the  goods  to  be  sup- 
plied  to  a  married  woman  or  an  infant.  Neither  does  the  fact  that 
the  guarantor  cannot  call  upon  the  person  for  whom  he  has  given  hi& 
guaranty  conslilute  any  defense.  The  party  to  whom  the  guaranty 
is  given  has  nothing  to  do  with  their  mutual  relations.  The  indorser 
guaranties  to  such  party  the  payment  of  the  instrument,  and,  if  it 
is  not  paid,  he  immediately  becomes  liable  upon  this  guaranty."" 
Whether  also  he  knew  of  any  defects  in  the  instrument  is  immaterial. 
If  the  indorser  knew  of  defects,  he  is  undoubtedly  liable  under  the 
general  principles  of  warranty  already  given.  If  the  indorser  did 
not  know  of  defects,  he  is  none  the  less  liable  in  damages  upon  the 
construction  of  the  general  contract  of  indemnity  he  made  when 
he  indorsed  the  instrument. 

The  existence  of  this  contract  as  a  distinct  stipulation  becomes 
more  apparent  when  we  consider  the  practical  application  of  these 
rules  by  the  courts.  Where  the  bill  or  note  is  forged  or  altered,  for 
example,  it  is  void,  as  we  have  said,  because  in  fact  no  such  legal 
obligation  was  ever  created.  Money,  therefore,  paid  upon  the  in- 
dorsement of  such  a  bill  or  note,  is  governed  by  the  same  principle 
that  governs  other  money  paid  under  a  mistake  of  fact.  In  other 
cases  the  equitable  action  for  money  had  and  received  will  lie  against 
one  who  has  received  money  which  in  conscieuce  does  not  belong  to 
him.*  And  so,  when  the  maker  or  acceptor  or  a  prior  indorser  has 
refused  to  pay  a  note  or  bill  upon  the  ground  that  it  is  void  because 
of  forgery,  or  alteration,  or  on  the  ground  of  usury,  gaming  consid- 
eration, or  the  like,  the  holder,  relying  upon  the  so-called  "warranty'^ 
of  the  indorser,  may  hold  him  for  the  money  paid  to  him  for  the  instru- 
ment 

«8  Remsen  v.  Graves,  41  N.  T.  471.  In  the  case  of  LAWSON  r.  FARMERS' 
RANK  Jt  was  held  by  the  court  that  the  liability  of  the  Indorser  was  strictly 
conditional  and  dependent  upon  due  demand  upon  the  maker  or  acceptor  and 
also  due  and  legal  notice  of  nonpayment.  The  purpose  of  such  demand  i9 
to  enable  the  Indorser  to  look  to  his  own  interests  and  to  secure  his  own  in- 
demnity. Demand  and  notice  being  conditions  precedent  to  the  indorser's 
liability,  the  holder  must  make  proof  of  them  before  he  can  recover.  LAW- 
SON  V.  BANK,  1  Ohio  St.  206. 

•  Kelly  v.  Solarl,  9  Mees.  &  W.  54. 


§  79)  WARRANTIES   OF    INDORSER    WITHOUT    RECOURSE.  167 

WARRANTIES     OF     INDORSER     WITHOUT      RECOURSE— OP 
TRANSFERROR  BY  DELIVERY. 

79.  Every  person  who  negotiates  a  bill  or  note  by  in- 
dorsement -without  recourse  or  by  delivery  -warrants: 

(a)  That  the  instrument  is,  in  every  respect  and  as  to 

all  prior  parties,    genuine,  and  neither   forged, 
fictitious,  nor  altered. 

(b)  That  he  has  good  title  to  the  instrument,  and  also 

a  right  to  transfer  it. 

(c)  That  he  has  no  kno-wledge  of  any  fact  which  would 

impair  the  validity  of  the  instrument  or  render 
it  valueless. 

(d)  That    all    prior    parties   -were   competent    to    bind 

themselves,    although    the    authorities    are    not 
unanimous  upon  this  point. 

(e)  That  the  instrument  is  a  valid  and   subsisting  ob- 

ligation, although  the  authorities  are  not  unani- 
mous upon  this  point,  and  in  states  -which  have 
adopted  the   Negotiable   Instruments    Law   this 
warranty  is  not  implied. 
But  -when  the  negotiation  is  by  delivery  only,  the  v/ar- 
ranty  extends   in   favor   of  no  holder  other  than  the  im- 
mediate transferee." 

The  indorser  without  recourse  and  the  transferror  of  a  bill  or  note 
by  delivery  stand  upon  much  the  same  footing.  So  far  as  an  indorse- 
ment and  transfer  is  a  promise  of  indemnity,  neither  the  transferror 
without  indorsement  nor  the  indorser  without  recourse  promises  to 
pay  the  instrument.  In  fact,  the  object  of  an  indorsement  without 
recourse  is  to  relieve  such  an  indorser  from  his  obligation  as  a  prom- 
isor of  indemnity.     He  exempts  himself  by  these  words  from   his 

•'The  last  paragraph  follows  the  language  of  Neg.  Inst.  L.  9  11.').  and  Im- 
plies that  the  warranty  of  the  Indorser  without  recourse  extends  to  substMiueut 
holders.  Whether  It  so  extends  Irrespective  of  statute,  qn;ure.  It  seems  that 
the  warranty  of  the  transferror  by  delivery  does  not,  Chalm.  Bills  &  N.  art 
22G,     But  see  2  Ames,  Cas.  Bills  &  N.  840,  882. 


168  OF   THE    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.       (Ch.   5 

promise  to  pay  if  the  parties  antecedent  to  him  do  not.  But  because 
the  transfer  is  in  effect  a  sale,  the  transfeiTor  without  recourse,  like 
the  seller  of  a  chattel,  warrants  his  title  *^  to  the  instrument  and  its 
{^euuiueness.*'*  And  it  would  seem  upon  principle,  for  the  reasons 
already  set  forth,"  that  all  the  warranties  which  are  implied  in  the 
case  of  unqualified  indorsements  should  apply  to  the  indorser  without 
recourse.  Accordingly  he  warrants  the  competency  of  prior  parties,^" 
and  the  validity  of  the  instrument,^^  although  upon  the  latter  point 
there  is  conflict  of  authority,  as  will  be  pointed  out  in  the  next  para- 
graph. 

When  the  transfer  is  of  paper  payable  to  bearer  and  is  made  by 
mere  delivery,  since  the  warranties  in  both  cases  arise  as  incidents 
to  the  sale,  there  seems  to  be  no  reason  why  the  same  warranties 
should  not  be  implied  as  those  which  arise  upon  an  ordinary  transfer 
by  indorsement  The  authorities  are  agreed  that  in  such  case  the 
transferror  warrants  his  title  ^^  and  the  genuineness  of  the  instru- 
ment,'''  and,  it  seems,  also  warrants  at  least  that  he  has  no  knowl- 
edge of  any  fact  which  would  impair  the  validity  of  the  instrument 
or  render  it  valueless.'*  And  it  has  frequently  been  held  that  he 
warrants  the  competency  of  the  prior  parties,'"  and  also  the  validity 
of  the  instniment.'*  On  the  other  hand,  it  has  been  held  in  a  lead- 
ing case  in  New  York,''  involving  a  note  void  for  usury,  that  the 

«7  Daniel.  Neg.  Inst.  §  670. 

•  •DUMONT  V.  WILLIAMSON,  18  Ohio  St.  515;  Palmer  v.  Courtney,  32 
Neb.  781,  49  N.  E.  754. 

6  9  Ante.  p.  1G3. 

TO  LOBDELL  v.  BAKER,  1  Mete.  (IMass.)  193,  3  Mete.  (ISIass.)  4G9  (transfer 
by  delivery). 

Ti  HANNUM  V.  RICHARDSON,  48  Vt.  508;  CHALLISS  v.  McCRUM,  22 
Kan.  157. 

T2  MURRAY  V.  JUDAH,  6  Cow.  (N.  Y.)  483;  HERRICK  v.  WHITNEY,  15 
Jolins.  (N.  Y.)  240;   Shaver  v.  Ehle,  16  Johns.  (N.  Y.)  201. 

T8  FRANK  V.  TINIER,  91  N.  Y.  112;    BELL  v.  DAGG,  60  N.  Y.  528. 

1*  Littauer  t.  Goldman,  72  N.  Y.  506.  See,  also,  Edw.  Bills  &  N.  §  355; 
Mandeville  v.  Newton,  119  N.  Y.  13,  23  N.  B.  920;  MERIDIAN  NAT.  BANK 
T.  GAI.LAUDET,  13  N.  Y.  St.  Rep.  269. 

TB  LOBDELL  V.  BAKER,  supra;  Baldwin  v.  Van  Deusen,  37  N.  Y.  487. 

Tt  HANNUM  V.  RICHARDSON.  48  Vt.  508;  CHALLISS  V.  McORUM,  22  Kan. 
157;   Giffert  y.  West,  33  Wis.  617. 

It  Littauer  v.  Goldman,  72  N.  Y.  506. 


§  79)  WARRANTIES    OF    INDORSER    WITHOUT    RECOURSE.  169 

transferror  by  delivery  was  not  liable  against  such  a  defect  upon  a 
warranty  of  validity,  and  that  in  such  case  it  is  necessary  for  the 
transferee  in  order  to  recover  to  prove  a  scienter,  that  is,  to  prove 
that  the  transferror  had  knowledge  of  the  defect.  The  court  said  that 
the  law  excepts  only  two  cases  as  coming  within  the  doctrine  of  an 
implied  warranty,  namely,  a  warranty  of  title  and  a  warranty  that 
the  instrument  ia  genuine  and  not  forged.  This  case  has  been  ad- 
versely criticised  by  the  supreme  court  of  the  United  States  ^^  in  an 
opinion  which  accepts  the  principle,  already  explained,  that  it  is  a 
conditioji  of  the  contract  of  sale,  often  miscalled  an  implied  war- 
ranty, that  the  thing  sold  must  be  what  it  is  described  or  pur- 
ports to  be,  and  thut  if  the  instrument  transferred  be  not  a  valid  and 
subsisting  obligation  there  is  a  breach  of  this  condition.  It  is,  indeed, 
only  by  accepting  this  principle  that  it  is  possible  to  imply  a  warranty 
of  genuineness,  and  the  logical  application  of  the  principle  requires 
the  implication  also  of  a  warranty  that  the  instrument  is  not  invalid, 
either  by  reason  of  incapacity  of  the  original  parties  or  of  illegality 
in  itii  inception.''"  The  Negotiable  Instruments  Law  '*•  has  in  part 
at  least  adopted  the  rule  as  laid  down  in  the  New  York  case;  for, 
while  it  declares  that  the  general  indorser  warrants  that  the 
insti'ument  is  valid  and  subsisting,  it  excludes  this  warranty  in  the 
case  of  transfer  by  delivery  as  well  as  of  indorsement  without  recourse, 
substituting  in  its  place  a  warranty  on  the  part  of  such  transferror 
that  he  has  no  knowledge  of  any  fact  which  would  impair  the  validity 
of  the  instrument  or  render  it  valueless.  Where  a  bill  or  note  is 
transferred  by  delivery  or  indorsed  without  recourse,  the  transferee 
takes  the  risk  of  the  insolvency  of  the  maker  or  other  principal  party, 
unless  the  transferror  be  guilty  of  fraud  in  passing  it  off  with  knowl- 
edge of  the  fact.'*     A  broker  or  other  agent  who  negotiates  a  bill 

T«  MEYER  V.  RICHARDS.  163  U.  S.  385.  16  Sup.  Ct.  114&  See.  also. 
Wood  V.  Sheldon,  42  N.  J.  Law,  421;    Daniel,  Neg.  Inst.  §  733a. 

T»  "The  opinion  In  this  case  [Llttauer  v.  Goldman]  •  •  ♦  admits  the 
common  law  rule  and  then  denies  Its  essential  result  by  eliminating  condi- 
tions of  nonexistence  which  are  necessarily  embraced  in  it.  •  •  •  Either 
the  principle  of  warranty  of  identity  must  be  accepted  or  rejected;  It  cannot 
be  accepted  and  its  legitimate  and  inevitable  results  denied."  Meyer  ▼.  Ulcli- 
ards,  supra,  per  White,  J. 

•0  Section  115.     Cf.  section  116. 

•  1  Blcknall  v.  Waterman,  5  R.  I.  43.  There  is,  however,  much  conflict  of 
authority  on  this  point.     See  Daniel,  Neg.  Inst.  8  737. 


170  OF    THE    NATURE    OF    TUB    LIABILITIES    OF    THE    PARTIES.       (Ch.    5 

or  note  without  indorsement  is  liable  upon  the  implied  warranties 
applicable  to  a  transferror  by  delivery,  unless  he  discloses  his  agency 
and  the  name  of  his  principal* 


DAM^ 


DAMAGES  AGAINST  THE  ACCEPTOR,  MAKER,  DRAWER,  AND 

INDORSERS  UPON  THE  BILL  OR  NOTE  AND 

UPON  THE  WARRANTIES. 

80,  The  acceptor  of  a  bill  of  exchange  and  the  maker 
of  a  promissory  note  is  liable,  upon  its  dishonor,  for  the 
amount  of  the  bill  or  note  and  legal  interest,  and  also  no- 
tarial expenses  -wrhere  they  are  allo-wed  by  law. 

Where  the  drawee  of  a  bill  of  exchange  has  agreed  for 
a  valuable  consideration  to  accept  it,  he  is  liable,  upon  its 
dishonor,  for  his  breach  of  promise  to  accept,  in  all  dam- 
ages -which  are  the  immediate  consequences  of  such  breach. 

The  measure  of  damages  to  be  recovered  against  a 
drawer  or  indorser  upon  his  indorsement  is — 

(a)  On  an  inland  bill:    the  amount  of  the  bill  and  in- 

terest, and  also  protest  fees  w^here  they  are  al- 
lowed. 

(b)  On  a  foreign  bill:   the  amount  of  the  bill,  interest, 

protest   fees,   re-exchange,    or   damages    in  lieu 

thereof. 
The  measure   of  damages  to  be  recovered  against  the 
drawer   or  indorsers   in   case  of  a  breach  of  warranty  is 
the  original  consideration. 

It  is  our  purpose  to  point  out  in  this  section  the  practical  applica- 
tion of  the  rules  we  have  laid  down,  by  showing  what  damages  the 
courts  administer  against  the  parties  upon  the  breach,  of  their  con- 
tracts. For  the  present  we  shall  leave  the  matter  of  consideration 
as  a  basis  for  damage,  both  as  between  parties  immediate  and  not 
immediate,  out  of  the  question.  The  rules  pertaining  to  this  point 
will  be  discussed  further  on.     The  only  point  to  be  considered  is  the 

•  CABOT  BANK  t,  MORTON,  4  Gray  (Mass.)  156;  WORTHINGTON  v> 
OOWLES,  112  Mass.  30.     Neg.  Inst.  L,  S  119.  so  declares  the  law. 


§  80)  THE    QUESTION    OF    DAMAGES,  171 

damages  which,  assuming  the  contract  between  the  parties  to  be  for 
value,  and  enforceable,  the  courts  find  were  in  contemplation  of  the 
parties  when  it  was  made. 

In  some  of  these  contracts,  important  items  are  exchange  and  re- 
exchange.  Exchange,  as  we  have  seen,  is  the  market  value  in  one 
country  of  money  to  be  delivered  in  another.  The  drawer  of  a  foreign 
bill  contracts  for  its  payment  at  the  place  where  it  is  drawn  payable. 
When  the  bill  is  dishonored,  the  doctrine  of  re-exchange  applies. 
Re-exchange  is  a  doctrine  founded  upon  equitable  principles.  It 
means,  for  instance,  when  the  payee,  for  example,  gives  premium  for 
a  bill  drawn  in  this  coimtry  payable  in  Paris,  France,  which  is  dis- 
honored in  Paris,  the  amount  which  would  restore  the  payee  to  the 
situation  he  was  in  when  he  bought  the  bill.  This  is  either  the  pay- 
ment of  the  money  in  Paris  that  the  payee  expected  to  and  would  get 
there,  or  the  payment  in  this  country  of  those  sums,  together  with 
the  difference  in  value  between  the  whole  sum  at  Paris  and  the  same 
amount  in  this  country.  This  difference  in  value  is  ascertained  by 
the  premium  on  a  bill  drawn  in  Paris  and  payable  in  this  country 
which  should  sell  at  Paris  for  the  sum  claimed.®^  In  many  states 
statutes  provide  for  a  fixed  amount  payable  by  way  of  damages  in  lieu 

8  2  Bank  of  United  States  v.  U.  S.,  2  How.  737.  In  SUSE  v.  POMPE,  30 
Law  J.  C.  P.  75.  8  0.  B.  (N.  S.)  538,  where  a  bill  was  drawn  and  indorsed 
in  Liverpool,  payable  In  English  money,  directed  to  V.  at  Vienna,  by  whom  it 
was  dishonored,  in  an  action  by  the  indorsees  against  the  Indorsers  It  was 
held  that  the  plaintiffs  were  entitled  to  recover  as  much  English  money  a» 
would  have  enabled  them  In  Vienna  on  the  day  of  maturity  to  pun-liase 
as  many  Austrian  florins  as  they  ought  to  have  received  from  the  drawee, 
with  the  expenses  necessary  to  obtain  them.  Byles,  J.,  said:  "Tlie  most 
obvious  and  direct  mode  of  obtaining  that  English  money  Is  to  draw  on 
Vienna  on  the  indorser  in  England  a  bill  at  sight  for  so  much  English  money 
as  will  purchase  the  required  number  of  Austrian  florins  at  the  actual  rate  of 
exchange  on  the  day  of  dishonor,  and  to  Include  In  the  amount  of  that  bill 
the  Interest  and  necessary  expenses  of  the  transaction.  The  whole  amount 
is  called  •  *  •  re-exchange.  •  •  •  This  bill  for  re-exchange  being  ne- 
gotiated at  Vienna  puts  into  the  poclcet  of  the  holder  at  the  proper  time  and 
place  the  exact  sum  which  he  ought  to  have  received  from  the  drawee.  •  •  • 
Although  In  English  practice  the  re-exchange  bill  Is  seldom  drawn,  yet  the 
theory  of  the  transaction  Is  as  we  have  above  described  it,  ami  settles  the 
principle  on  which  the  damatjes  are  to  be  computed,  although  uo  re-exchange  bill 
be  Id  fact  drawn." 


172  OF   THE    NATUIiE    OF   THE    LIABILITIES    OF    THE    PARTIES.       (Cll.   5 

of  re-exchange.t    Notarial  fees  are  those  incurred  for  a  notary  where 
protest  is  required  or  permitted  by  law. 

The  other  principal  item  of  damage  is  the  amount  nominated  in 
the  princiital  terms  of  the  paper,  and  this  discussion  principally  per- 
tains to  this,  and  how  far  the  warranties  relate  to  it.  The  general 
rule  is  that  the  acceptor  and  drawer  of  a  bill,  the  maker  of  a  note, 
and  all  indorsers  are  liable  for  the  amount  nominated  in  the  bill,  and 
interest."  It  is,  however,  held,  though  not  without  weighty  dissent, 
that  as  against  his  immediate  indorser  the  recovery  of  an  indorsee 
is  limited  to  the  amount  of  the  consideration  paid  with  interest.*     In 

t  Rand.  Com.  Paper,  §  1720. 

83  Daniel,  Neg.  Inst  §  749;  Rand.  Com.  Paper,  §  1726.  Where  the  Instru- 
ment provides  for  interest,  It  runs  from  the  date.  Dorman  v.  Dibdin,  Hiiss. 
&  M.  381;  Williams  v.  Baker.  67  111.  238;  CAMPBELL,  PRINTING  PRESS  & 
MFG.  CO.  V.  JONES,  79  Ala.  475.  See  Neg.  Inst.  L.  §  3G,  subd.  2.  Interest  on  a 
■demand  note  runs  from  demand.  Barough  v.  White,  4  B.  &  C.  325;  Breyfogle  v. 
Beckley.  16  Serg.  &  R.  2(U;  Hunter  v.  Wood,  54  Ala.  71.  Where  the  rate 
fixed  by  law  as  prevailing  In  absence  of  contract  is  lower  than  the  contract 
rate,  the  better  opinion  Is  that  after  maturity  the  contract  rate  should  still 
prevail.  Seymour  v.  Insurance  Co.,  44  Conn.  300;  Cecil  v.  H'cks,  29  Grat.  (Va.) 
1;  Findlay  v.  Hall,  12  Ohio  St.  610;  Pruyn  v.  Milwaukee,  18  Wis.  5G8. 
Contra,  Macomber  v.  Dunham,  8  Wend.  (N.  Y.)  550;  Dur?)n  v.  Ayer,  G7  Me. 
14.j;  Newton  v.  Kennerly,  31  Ark.  626.  Cf.  Holden  v.  Trust  Co..  100  U.  S.  72; 
CROMWELL  V.  COUNTY  OF  SAC.  96  U.  S.  61.  See  Daniel,  Neg.  Inst.  § 
1458a.  Interest  after  maturity  is  by  way  of  damages.  W^here  no  Interest  is 
reserved,  interest  runs  after  maturity  at  the  legal  rate.  Lithgow  v.  Lyon,  Coop. 
Ch.  (Tenn.)  29;  Laing  v.  Stone,  2  Man.  &  R.  562;  Swett  v.  Hooper,  62  Me. 
54;  Godfrey  v.  Craycraft,  81  Ind.  476,  As  to  conflict  of  law  governing  in- 
terest by  way  of  damages,  see  post,  188. 

*  Miinn  V.  Commission  Co.,  15  Johns.  43.  In  this  case  It  was  decided  that, 
where  a  payee  parts,  for  a  discount  greater  than  the  legal  rate  of  interest, 
with  a  valid  note  upon  which  he  might  maintain  an  action  when  mature,  such 
transfer  Is  not  usurious,  even  where  the  payee  Indorses  the  note,  and  the  In- 
dorsee may,  on  nonpayment  by  the  maker,  sue  the  Indorser,  but  that  his 
recovery  will  be  the  amount  advanced  by  him  and  the  Interest  thereon.  In 
CRAM  V.  HENDRICKS,  the  above  case  was  cited  upon  a  point  similar,  and  the 
decision  was  to  the  same  effect.  7  Wend.  (N.  Y.)  569;  Ingalls  v.  Lee,  9  Barb. 
647;  Judd  v.  Seaver,  8  Paige,  548;  Hutchins  v.  McCann.  7  Port.  (Ala.)  94; 
Noble  V.  Walker.  32  Ala.  456;  Raplee  v.  Morgan.  3  111.  561;  Semmes  v.  Wilson, 
5  Crnnch.  C.  C.  285,  Fed.  Cas.  No.  12,658;  Bank  of  U.  S.  v.  Smith.  4  Cranch, 
C  C.  712,  Fed.  Cas.  No.  936.  But  see  contra,  Roark  v.  Turner,  29  Ga.  4.55; 
JJATIONAL  BANK  v.  GREEN,  33  Iowa,  140;    DURANT  v.  BANTA,  27  N.  J. 


§  80)  THE   QUESTION    OF   DAMAGES.  175 

addition  to  this,  the  rules  governing  these  parties  as  to  re-exchange 
and  fees  are  as  follows:  The  acceptor  at  common  law  is  probably 
not  primarily  liable  to  the  holder  for  re-exchange,  because  his  con- 
tract is  to  pay  the  money  named  in  the  bill  at  the  place  of  payment 
and  not  at  the  place  of  drawing;  **  nor  is  he  liable  for  damages;  *■* 
though  the  better  reason  seems  to  be  that  he  is  liable  to  the  drawer, 
where  he  has  dishonored  the  bill  which  he  had  promised  to  pay  and 
the  drawer  has  been  obliged  to  pay  re-exchange.® ®  It  is  probably 
the  common-law  rule,  also,  that  the  maker  of  a  note  is  liable  neither 
for  re-exchange  nor  damages  because  of  the  supposed  rule  that  notes 
are  subject  to  the  rules  of  the  law  merchant  only  in  those  respects 
covered  by  the  enactment  of  the  statute  of  Anne;  ®^  though  it  must 
be  added  that  this  point  is  by  no  means  settled.*®  Protest  fees  are 
chargeable  against  the  acceptor  and  maker  only  when  a  protest  is 
required  or  permitted  by  law.  But  when  it  is  required,  or  permitted 
but  not  required,  they  are  allowed  as  an  item  of  damage,®"  The 
drawer  and  the  indorsers,  in  their  succession,  are  liable  for  protest 
fees,  and,  in  case  of  foreign  bills,  for  all  re-exchanges,  or  else  dam- 
ages in  lieu  thereof.*" 

These  rules  being  understood,  it  only  remains  to  consider  the  dam- 
Law,  624.  See  Daniel,  Neg.  Inst.  §§  767,  768;  2  Ames,  Cas.  Bills  &  N.  819 
(supporting  the  latter  view). 

84  Newman  v.  Goza,  2  La.  Ann.  642;  Trammell  r.  Hudmon,  56  Ala.  237; 
Watt  V.  Riddle,  8  Watts,  545. 

85  Bo  wen  v.  Stoddard,  10  Mete.  (Mass.)  375;    Manning  v.  Kohn,  44  Ala.  343. 

86  WALKER  V.  HAMILTON,  1  De  Gex,  F.  &  J.  602;  Bowen  v.  Stoddard, 
10  Mete.  (Mass.)  379,  per  Hubbard,  J.;  In  re  General  South  American  Co.,  37 
Law  T.  599.  Some  authorities  hold  that  the  acceptor  is  liable  for  re-exchange 
to  the  holder.     Daniel,  Neg.  Inst.  §  1449. 

8T  Martin  v,  FrankUn,  4  Johns.  (N,  Y.)  124;  SCOFIELD  r.  DAY,  20  Johns. 
(N.  Y.)  102;  Adams  v.  Cordis,  8  Pick.  260;   Lodge  v.  Spooner,  8  Gray,  166. 

8  8  Lee  V.  Wllcocks,  5  Serg.  &  R.  48;  Grant  v.  Healey,  3  Sumn.  523.  Fed. 
Cas.  No.  5.696. 

89  .Johnson  v.  Bank  of  Fulton,  29  Ga.  260;  German  v.  Ritchie,  9  Kan.  110; 
MERRITT  V.  BENTON.  10  Wend.  (N.  Y.)  117  (where  It  was  held  that  the 
protest  fee  Is  an  expense  to  which  the  holder  of  a  note  is  subjected  by  the 
default  of  an  Indorser,  whose  duty  it  Is  to  pay  at  maturity,  and  that  the  holder 
should  therefore  recover  it  "It  may  fairly  be  considered  as  a  charge  Incident 
upon  the  Indorser's  failure  to  perform  his  contract"). 

••  MELLISH  V.  SIMEON,  2  H.  Bl.  878;   Tied.  Com.  Paper,  i  407. 


174  OF    THE    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.        (Cll.   5 

n.uos  administered  by  the  courts  with  reference  to  the  drawee,  when 
he  refuses  to  accept,  and  upon  the  warranties  which  have  been  the 
subject  of  discussion  in  this  chapter.  Of  these  latter,  the  students 
will  have  noticed  that  we  have  pointed  out  a  distinction  between 
the  acceptor,  on  the  one  hand,  and  the  drawer  and  indorser,  on  the 
other.  In  the  case  of  the  acceptor,  the  rules  of  law  were  merely  to 
the  effect  that  the  acceptor  was  estopped  from  denying  certain  items. 
There  was  nothing  of  a  promise  which  might  be  the  basis  of  an 
afiirmative  right  contained  in  them.  The  acceptor's  liability,  there- 
fore, is  limited  to  the  contract  contained  in  words  of  the  bill.  But 
the  liability  of  the  drawer  and  indorser  on  his  so-called  warranty  is 
the  basis  of  an  affirmative  right  of  action.  It  is  different  in  its  nature 
from  the  estoppel  of  the  acceptor,  because  the  acceptor  is  not  affirma- 
tively liable  as  acceptor  thereon.  He  is,  however,  liable  as  drawee 
before  acceptance  to  the  drawer,  if,  under  certain  circumstances,  he 
does  not  accept  the  bill.  The  drawer,  as  we  have  seen,  may  then 
have  one  of  two  remedies.  He  may  either  sue  the  drawee  upon  the 
original  consideration  or  for  damages.®^  "WTiat  the  original  consid- 
eration is  will  be  dilTerent  according  to  the  circumstances  of  each 
case.  Where  the  drawer  chooses  the  alternative  of  damages,  he  sues 
upon  the  promise  to  accept,  and  the  damages  are  then  measured  by 
his  loss  and  inconvenience,  and  not  by  the  amount  of  the  diaft.'* 
The  promise  to  accept  is  then  the  foundation  of  the  right  of  action, 
and  not  the  bill  itself. 

The  general  rule  that  the  warrantor  shall  pay  so  much  as  the  actual 
value  of  property  falls  short  of  what  it  would  be  worth  if  the  war- 
ranty had  been  kept,  applicable  to  warranties  of  quality  or  title  of 
personal  property,  does  not  apply  to  bills  and  notes.""  With  nego- 
tiable instruments  between  immediate  parties  the  recovery  of  dam- 
ages is  limited  to  the  amount  paid  out  by  reason  of  the  breach  of  war- 
ranty, or,  in  other  words,  to  refunding  the  consideration.**  The  right 
upon  which  such  an  action  rests  is  that  upon  which  actions  foiJ 

01  See  supra,  p.  80. 

»2  2  Suth.  Dam.  p.  104;  Ilsley  v.  Jones,  12  Gray  (Mass.)  260;  Sedg.  Dam. 
(6th  Ed.)  p.  296. 

»»  Sedg.  Dam.  (6th  Ed.)  p.  340;   Suth.  Dam.  p.  149. 

•  *  GOMPERTZ  T.  BARTLETT,  2  El.  &  BL  854;  AL.DRICH  T.  JACKSON. 
5  R.  I.  218;   BELL  Y.  DAGG,  60  N.  Y.  530. 


§  80)  THE    QUESTION    OF    DAMAGES.  175 

moneys  had  and  received  also  rest.  The  first  element  of  such  actions 
is  that  money  or  property  has  been  received  by  the  defendant  to 
which  in  equity  and  good  conscience  he  is  not  entitled,  and  the  court, 
in  its  remedy,  aims  to  restore  just  the  property  received,  neither  more 
nor  less.®^  The  consideration  may  always  be  shown  between  these 
immediate  parties,  and  the  consideration  proved  always  measures  the 
amount  of  the  recovery.'^ 

These  rules  we  have  just  given  must  be  applied  with  caution.  Tliey 
are  doubtless  the  settled  law  in  case  of  warranties  between  imme- 
diate parties.  But  even  between  immediate  parties  there  is  not  much 
business  reason  why  the  general  rule  of  contracts  should  be  departed 
from  and  the  consideration  returned  rather  than  the  contract  per- 
formed. The  effect  of  the  consideration  should  be,  as  in  other  cases, 
only  to  make  the  indorser's  promise  of  indemnity  binding,  and  not 
to  furnish  a  measure  of  damages.  There  is  still  less  reason  why  the 
consideration  should  furnish  a  measure  of  damage  between  parties 
not  immediate.  As  between  them  the  consideration  is  not  even  open 
to  inquiiy.'*  And  if  it  be  true  that  the  consideration  is  eliminated 
as  an  item  of  proof,  it  would  logically  follow  that  it  would  be  elimi- 
nated as  an  item  of  damage  also.  In  which  case  the  other  ground 
of  damages — the  promise  of  the  indorser  to  pay  the  whole  instru- 
ment— remains  for  the  court  to  apply.  There  is  privity  of  contract 
sufficient  for  this  between  remote  parties  because  privity  between 
immediate  indorsers  is  carried  forward  through  the  chain  of  indorse- 

»B  It  has  been  held  that  an  accommodation  indorser  who  Indorsed  a  draft 
which  had  without  his  knowledge  been  raised,  to  enable  another  to  olitain 
the  money  at  a  bank,  could  not  be  held  liable  by  reason  of  the  alteration 
without  demand  and  notice,  the  court  holding  that  an  Indorser,  to  be  held  as 
guarantor,  must  have  himself  received  consideration.  Susquehanna  Valley 
Bank  v.  Loomis,  85  N.  Y.  207.  But  this  case  has  been  adversely  criticised  on 
the  ground  that  the  consideration  paid  to  tlie  party  accommodated  is  attrib- 
utable to  the  accommodation  indorser,  and  that  the  rule  of  notice  applies  only 
to  the  indorser's  contract  of  indemnity.     See  Daniel,  Neg.  Inst.  §  6G9. 

»T  BROWN  V.  MOTT,  7  Johns.  (N.  Y.)  3G1;  Braman  v.  Hess,  13  Johns.  (N. 
Y.)  52;  Rapelye  v.  Anderson,  4  Hill  (N.  Y.)  472;  WIFFEN  v.  ROBEUl'S.  1 
Esp.  2(n;    Livingston  v.  Hastie,  2  Caines,  248. 

«8  CRAM  v.  HENDRICKS.  7  Wend.  (N.  Y.)  5(59;  Munn  v.  Commission  Co.. 
15  Johns.  (N.  Y.)  44;  Collier  v.  Nevill,  3  Dev.  31;  Llttell  v.  Hord.  Hardin.  87; 
Cowles  v.  McVlckar,  3  Wis.  725;  Importers'  &  T.  Nat.  Bank  v.  Llttell.  47  N. 
J.  Law.  234. 


176  OF   THE    NATURE   OF   THE    LIABILITIES    OP   THE    PARTIES.       (Ch.   '> 

ments  to  the  holder  prosecuting;  so  that,  in  the  phraseology  of  the 
old  commou-law  remedies,  debt  would  lie  ®^  as  well  as  assumpsit  for 
moneys  paid  out  on  account  of  the  indorsement.^"**  And  thus  the 
better  reason  seems,  in  case  of  parties  not  immediate,  to  support  the 
variation  from  the  rule  we  have  quoted,  and  to  hold  that  as  to  them 
the  face  of  the  paper  furnishes  the  measure  of  damages.^"* 

ACCOMMODATION  PAETIES  AND  PERSONS  ACCOMMO- 
DATED, 

81.  AN  ACCOMMODATION  PARTY  — Means  a  person 
•who  has  signed  a  bill  or  note  as  acceptor  or  dra-wer, 
maker,  or  indorser,  -writhout  recompense,  and  for  the  pur- 
pose of  lending  his  name  to  some  other  person  as  a  means 
of  credit. ^<" 

82.  The  accommodated  party  impliedly  contracts: 

(a)  That  he  ■will  pay  the  bill  or  note. 

(b)  That  he  ■will  repay  the  accommodation  partv 

for   all   loss  incurred,  if  that   party  is  com- 
pelled to  pay  in  case  of  his  default. 

83.  The  accommodation  party  is  liable  to  all  parties  ex- 
cept the  party  accommodated. 

As  between  the  accommodated  and  accommodation  party,  the  paper 
is  given  gratuitously.  Between  them  there  is  no  binding  contract, 
because  the  accommodation  paper  is  not  based  upon  a  consideration. 

••ONONDAGA  COUNTY  BANK  v.  BATES,  3  HIU  (N.  Y.)  53.  In  this 
case  the  court  referred  to  the  case  of  Wilmarth  v.  Crawford,  10  Wend.  (N.  Y.) 
343,  in  which  it  had  held  that  debt  would  He  by  an  indorsee  against  the 
maker  of  a  note  on  the  ground  that,  since  the  statute  making  promissory  notes 
negotiable,  the  money  payable  thereby  became,  by  virtue  of  the  transfer,  due 
and  payable  to  Indorsee  or  holder;  and  that,  in  Judgment  of  law,  privity  of 
contract  existed  between  the  parties.  See,  also,  HODGES  v.  STEWARD,  1 
Salk.  125;  Prlddy  v.  Henbrey.  1  Barn.  &  C.  674;  Stratton  v.  HIU,  3  Price,  253; 
Riddle  V.  Mandevllle,  5  Cranch,  322. 

100  Barker  v.  Casidy,  16  Barb.  177. 

101  Mason  v.  Mason,  8  Cranch,  C.  C.  648,  Fed.  Oas.  No.  9,245. 

"2  Benj.  Chalm.  Dig.  art.  90;  Byles,  Bills,  131;  Rand.  Com.  Paper,  §  472; 
1  Pars.  Notes  &  B.  184.     Cf.  Neg.  Inst  L.  §  55. 


§§  81-83)       ACCOMMODATION  PARTIES  AND  PERSONS  ACCOMMODATED.        177 

But  subsequent  parties,  who  discount  the  paper,  are  on  a  different 
footing.  With  them,  not  only  the  accommodated,  but  also  the  accom- 
modation, party  may  be  considered  as  entering  into  a  contract  upon 
a  consideration  received  by  the  accommodated  party  only,^"^  for  the 
accommodation  party  has  offered  to  all  the  world  to  loan  his  credit 
upon  the  instrument.^"*  The  parties  who,  subsequent  to  the  offer, 
have  either  discounted  the  instrument  or  paid  for  it  when  due,  have 
accepted  that  offer  and  paid  for  it,  and  may  enforce  it  even  though 
themselves  subsequent  accommodation  parties.^"''  Thus,  in  accom- 
modation paper  there  are  three  classes  of  relations  to  be  considered: 

(1)  The  liability  upon  the  paper  of  the  accommodated  party  to  the 
accommodation  party. 

(2)  The  liability  upon  the  paper  of  the  accommodating  party  to  the 
person  for  whose  accommodation  he  has  given  it. 

(3)  The  liability  upon  the  paper  of  the  accommodating  party  to  all 
the  other  parties  who  take  it.^*" 

In  case  of  a  bill,  if  the  acceptance  be  for  the  drawer's  acconmioda- 
tion,  the  acceptor  does  not  thereby  become  entitled  to  sue  the  drawer 
upon  the  bill.  But  when  he  has  paid  the  bill,  and  not  before,  he  may 
recover  back  the  amount  from  the  drawer  in  an  action  for  money  had 
and  received.^**^  This  is  equally  the  case  with  the  accommodation 
maker  of  a  note.  He  cannot  sue  the  payee  for  whom  he  makes  the 
accommodation.  In  either  case,  only  the  amount  paid  by  the  accom- 
modation party  can  be  recovered.  The  reason  for  this  is  that,  the 
maker  and  acceptor  of  the  instrument  being  the  ultimate  parties  to 
it,  when  the  instrument  is  paid  by  them  it  is  extinguished,  and  no 
longer  exists  as  a  valid  instrument.  Therefore,  the  instrument  not 
being  in  existence,  the  acceptor  or  the  maker  cannot  recover  upon 

108  Teaton  v.  Bank  of  Alexandria,  5  Oranch,  49. 
104  Meyer  v.  Hibsher,  47  N.  Y.  2G5. 

106  KELLY  V.  BURROUGHS,  102  N.  Y.  93.  6  N.  E.  109. 

loe  Hodges  v.  Nash,  43  111.  App.  638,  Johns.  Cas.  Bills  &  N.  153;  Thatcher 
v.  West  River  Nat.  Bank,  19  Mich.  196;  Warder  v.  Gibbs.  92  Mlth.  29.  52 
N.  W.  73.  The  fact  that  a  bill  or  note  was  accommodation  paper  furnishes 
no  defense  as  against  one  advancing  money  upon  It.  Church  v.  Barlow,  9 
Pick.  (Mass.)  547;  Thompson  v.  Shepherd,  12  Mete.  (Mass.)  311;  SHAW  v. 
KNOX.  98  Mass.  214;  Davis  t,  Randall,  116  U&aM,  647.  But  lee  Qulnn  t 
Fuller.  7  Gush.  (Mass.)  224. 

107  Pearce  v.  Wilkins,  2  N.  Y.  468. 

NEG.BILLS.— 12 


178  OF   THE    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.       (Ch.   5 

the  instrument  itself.' °»  The  principle  is  the  same  when  the  accom- 
modation party  is  subsequent  to  the  party  ^"^  for  whom  he  gives  the 
accommodation  as  where  the  accommodated  party  is  the  maker  of 
a  note  and  the  accommodation  party  is  payee.  There,  the  instru- 
ment being  without  consideration  as  between  the  payee  and  the 
maker,  the  accommodation  party  cannot  sue  the  accommodated  party, 
because  the  instrument,  as  between  them,  is  without  consideration 
and  a  nudum  pactum.  The  accommodated  party  can  in  no  case  look 
to  the  accommodation  party,  for  the  reason  that  the  obligation,  aa 
between  them,  is  without  consideration  and  a  nudum  pactum;  and 
also  that  the  purpose  of  the  instrument  was  that  the  accommodation 
party  should  give  it  "the  secmnty"  of  his  name.  This  being  the  in- 
tention of  the  obligation,  no  action  will  lie  in  behalf  of  the  party  to 
whom  accommodation  is  given. ^^° 

These  relations  between  the  accommodated  and  accommodation 
parties  do  not  invalidate  it  as  to  third  parties.  Knowledge  of  the 
mere  want  of  consideration  between  the  original  parties  will  not  alone 
prevent  the  purchaser  from  becoming  a  bona  fide  holder,' ^^  Accom- 
modation paper  is  daily  placed  in  the  market  for  discount  or  sale,  and 
the  indorsee  or  purchaser  who  knows  that  a  bill  or  note  was  drawn, 
made,  accepted,  or  indorsed  without  consideration  is  as  much  enti- 
tled to  recover  as  if  he  had  been  ignorant  of  the  fact^'^     The  pur- 

108  Griffith  V,  Reed,  21  Wend.  505;  Young  v.  Hockley,  3  Wila.  346;  Pomeroy 
V.  Tanner,  70  N.  Y.  547;  Suydam  v.  Westfall,  2  Denio.  205.  But  In  Fowler  v. 
Strickland,  107  Mass.  552,  It  was  held  that  an  accommodation  payee  and 
Indorser,  for  accommodation  of  the  maker,  who  took  up  the  note  for  less  than 
Its  face,  could  recover  the  full  amount  from  the  maker. 

109  Van  Duzer  v.  Howe,  21  N,  Y,  531;   Kitchel  v.  Schenck,  29  N.  Y.  515. 

110  Jackson  v.  Warwick,  7  Term  R.  121;  LANCE Y  v.  CLARK,  64  N.  Y.  209; 
Knight  V.  Hunt,  5  Blng.  432;  Sparrow  v.  Chisman,  9  Barn.  &  C.  241;  THOMP- 
SON V.  CLUBLEY,  1  Mees.  &  W.  212.  In  this  action  by  an  Indorsee  against 
the  acceptor  of  a  bill  of  exchange,  it  was  held  that  the  acceptor  might  show 
that  the  acceptance  was  for  the  accommodation  of  the  plaintiff,  and  that  he 
had  received  no  consideration  from  the  drawer,  and  also  that  it  was  agreed 
that  when  due,  the  bill  should  be  taken  up  by  the  plaintiff, 

111  Fitch  V.  McDowell,  80  Hun,  207,  30  N.  Y.  Supp.  31;  Palmer  v.  Field,  76 
Hun,  229.  27  N.  Y.  Supp.  736. 

112  MOORE  V.  CROSS,  19  N.  Y.  227;  Meyer  v.  Hibsher,  47  N.  Y.  265; 
Montrosa  v.  Clark,  2  Sandf.  (N.  Y.)  115;  Lincoln  v.  Stevens,  7  Mete.  (Mass.) 
529;  Stephens,  v.  Monongahela  Nat.  Bank.  88  Pa.  St.  163;  Thatcher  v.  Bank, 


§§  81-83)       ACCOMMODATION  PARTIES  AND  PERSONS  ACCOMMODATED.        179 

chaser  of  accommodation  paper  with  mere  notice  of  the  accommoda- 
tion is  a  bona  fide  purchaser,^^'  The  bill  is  accepted  or  note  made 
for  the  accommodation  of  another,  for  the  purpose  of  furnishing  a 
guaranty.  The  fact  that  all  the  world  knows  it  was  a  guaranty  with- 
out consideration  is  immaterial.^^*  And  if  the  accommodation  i)arty 
seeks  a  defense  in  saying  that  it  is  accommodation  paper,  it  will  not 
be  necessary  for  the  holder  to  show  on  hia  part  in  rebuttal  that  be 
gave  value  for  it. 

This  rule  is  subject  to  modifications.  In  New  York  ^^°  the  authori- 
ties depart  from  the  English  rule.  An  accommodation  indorser  is 
discharged  by  the  transfer  of  a  bill  or  note  after  maturity,  because 
it  is  considered  unfair  to  treat  an  accommodation  indorsement  as  a 
continuing  guaranty.^^'     It  was  not  the  intention  of  the  accommoda- 

19  Mich.  196;  Jones  v.  Berryhill,  25  Iowa,  289;  Cronise  v.  Kellogg,  20  111.  11. 
Where  an  accommodation  note  was  executed  at  the  reques-t  of  the  person  to 
whom  it  was  delivered,  on  his  statement  that  he  needed  money  and  had  ex- 
ceeded his  line  of  discounts,  and  was  made  payable  to  a  bank,  the  obvious 
purpose  was  to  procure  its  discount  at  such  bank;  and  the  fact  that  when  it 
made  the  discount  it  was  chargeable  with  notice  of  the  purpose  for  which 
the  note  was  given  would  not  prevent  its  recovery  thereon.  Israel  v.  Gale, 
174  U.  S.  391,  19  Sup.  Ct.  768. 

lis  GRANT  V.  ELLICOTT,  7  Wend.  (N.  Y.)  227;  BROWN  v.  MOTT,  1  Johns. 
<N.  Y.)  361;  Montross  v.  Clark,  2  Sandf.  (N.  Y.)  115;  Thatcher  v.  West  River 
Bank.  19  Mich.  202;  CHARLES  v.  MARSDEN,  1  Taunt.  224;  Jones  v.  Berry- 
hill,  25  Iowa.  289;   Bank  of  Ireland  v.  Beresford,  6  Dow,  237. 

114  In  the  case  of  GRANT  v.  ELLICOTT,  7  Wend.  (N.  Y.)  227,  holding  that, 
in  an  action  by  the  payee  against  the  acceptor,  the  fact  of  an  acceptance  being 
for  accommodation  was  no  defense,  the  court  cited  the  opinion  of  Lord  Eldon 
in  SMITH  v.  KNOX,  3  Esp.  46,  to  the  effect  that  where  an  accommodation 
paper  is  sent  out  It  is  no  answer.  In  an  action  upon  such  bill,  that  the  acceptor 
accepted  for  the  accommodation  of  the  drawer,  and  that  such  fact  was  known 
to  the  holder.  If  a  bona  fide  consideration  were  given,  the  holder  could  re- 
cover, though  with  full  knowledge  of  the  transaction.  See,  also,  CHARLES 
V.  MARSDEN.  1  Taunt.  224. 

110  CHESTER  V.  DORR,  41  N.  Y.  279. 

ii«  In  the  case  of  CHESTER  v.  DORR,  It  was  held  that  an  accommodation 
indorser,  without  consideration,  of  a  promissory  note,  Is  not  liable  to  a  trans- 
feree after  maturity  from  the  person  for  whose  accommodation  It  whh  In- 
dorsed, although  the  transferee  paid  full  consideration.  The  defense  of  want 
of  consJderation  attaches  after  maturity.  Into  whatever  hands  It  may  come. 
In  the  course  of  his  opinion.  Woodruff,  J.,  said:  "I  deem  the  Just  view  of  the 
subject  to  be  that  when  a  note  has  become  due,  and  in  dishonored,  the  rightg 


180  OF    THK    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.       (Ch.   5 

tion  indorser  to  be  liable  upon  his  indorsement  for  all  time.  It  wa» 
only  his  intention  to  give  indemnity  to  such  persons  as  took  the  biU 
or  note  during  the  time  when,  by  its  terms,  it  was  supposed  to  cir- 
culate, or,  in  other  words,  up  to  the  time  of  the  maturity  of  the  instru- 
ment. And  it  would  be  contrary  to  the  intention  of  the  parties  and 
unwarrantable  to  create  extensions  of  time  after  the  instrument  had 
become  due.  This  modification  prevails  in  some  other  states.^^''  It 
is  in  direct  contradiction  to  the  English  and  to  the  common-law 
rule.*^* 

Another  modification  of  this  rule  applying  to  immediate  parties  i» 
in  case  of  what  is  called  "diversion."  It  often  happens  that  one  busi- 
ness man  tells  a  second  that  he  wants  to  borrow  his  credit  for  a 
specified  purpose,  and,  to  further  that  purpose,  the  second  man  ac- 
cepts a  bill,  or  makes  or  indorses  a  note  for  the  first  to  discount- 
This  arrangement  amiounts  to  an  agreement  between  them  that  the 
instrument  shall  be  devoted  to  that  especial  purpose.  And  the  ques- 
tions arising  upon  the  diversion  of  accommodation  paper  are  mainly 
whether  the  instrument  has  been  used  for  the  purpose  for  which  it 
was  given  or  not. 

The  cases  make  a  distinction  between  material  and  immaterial 
diversion.  A  material  diversion  has  these  elements:  (1)  The  accom- 
modation party  must  have  some  interest  in  the  application  of  the 
money  raised  on  the  bill  or  note.  Unless  he  has,  he  is  not  in  a  posi- 
tion to  object  that  there  has  been  a  misapplication  of  the  paper  on 
which  he  is  the  accommodation  party.^^*  (2)  The  accommodation 
bill  or  note  must  be  made  for  some  specific  purpose,  and  be  diverted 

and  responsibilities  of  the  parties  thereto  are  fixed  •  •  •  and  thereafter 
he  who  tal^es  it  talies  it  with  knowledge  of  its  dishonor,  ♦  •  •  and  with 
just  such  right  to  enforce  It  as  the  holder  has,  and  no  other."  CHESTER  v. 
DORR.  41  N.  Y.  279.     See,  also,  Hascall  v.  Whitmore,  19  Me.  102. 

11 T  Bower  v.  Hastings,  36  Pa.  St.  285;  Barnett  v.  Offerman,  7  Watts,  130; 
Hoffman  v.  Foster,  43  Pa.  St.  137;  Battle  v.  Weems,  44  Ala.  105;  Bacon  v. 
Harris,  15  R.  I.  599,  10  Atl.  647. 

118  CHARLES  v.  MARSDEN,  1  Taunt.  224;  STURTEVANT  v.  FORD,  4 
Man.  &  G.  101;  Carruthers  v.  West,  11  Q.  B.  143;  STEIN  v.  YGLESIAS,  3 
Dowl.  252;  First  Nat.  Bank  of  Salem  v.  Grant,  71  Me.  374,  with  note;  SEY- 
FERT  V.  EDISON.  45  N.  J.  Law,  393.     See  post,  p.  211. 

118  Edw.  Neg.  Inst.  §  451;  Mohawk  Bank  v.  Corey,  1  Hill,  513;  Story.  Bills, 
I  191;  Dawson  v.  Goodyear,  43  Conn.  548;  Quinn  v.  Hard,  43  Vt  375;  FET- 
TERS V.  MUNCIE  NAT.  BANK.  34  Ind.  254. 


§§  81-83)       ACCOMMODATION  PARTIES  AND  PERSONS  ACCOMMODATED.        181 

to  some  other  purpose.*'*  An  immaterial  diversion  is  where  an 
accommodation  bill  or  note  is  made  for  the  purpose  of  loaning  the 
pai-ties  credit  generally/^^  or  where  the  substantial  design  for  which 
the  instrument  was  given  is  not  departed  from/^^  or  where  the  agree- 
ment for  wliich  the  instrument  was  given  and  which  is  broken  is  not 
one  of  substance  and  is  unimportant.  An  immaterial  diversion  can- 
not avail  as  a  defense.  A  material  diversion  is  thus,  in  some  respects, 
like  a  contract,  based  upon  a  consideration.  There  is  some  substan- 
tial interest  at  stake  which  makes  it  binding  upon  the  accommoda- 
tion party  to  carry  oat  its  purpose.  If  he  fails  to  do  this,  the  reason 
for  its  being  given  fails.  It  then  becomes  the  duty  of  the  accommo- 
dated party  having  it  in  possession  to  return  it.  If,  in  defiance  of  the 
agreement,  the  note  is  misapplied,  then  it  is  a  fraud,  which,  as  in  the 
case  of  other  contracts,  vitiates  the  agreement  between  parties  and 
privies,  and  against  the  defense  of  which  the  courts  will  allow  no 
recovery.^^'  The  purchaser  of  accommodation  paper  obtained  by 
fraud,  deception,  or  fraudulently  misapplied,  with  notice  of  these  facts, 
is  not  a  bona  fide  holder,  but  rather,  if  he  attempts  to  recover  upon 
the  paper,  is  a  partaker  in  the  fraud. ^''* 

Carrying  in  mind  that  accommodation  paper  is  a  mere  loan  of 
credit,  or,  at;  it  sometimes  is  put,  a  loan  of  money,  the  purchaser  be- 

120  Bank  of  Rutland  y.  Buck,  5  Wend.  66;  Kasson  v.  Smith,  8  Wend.  437; 
Spencer  v.  Baliou,  18  N.  Y.  327;  WOODHULL  v.  HOLMES,  10  Johns.  (N.  Y.) 
231. 

121  Cole  V.  Saulpaugh,  48  Barb.  104;    Schepp  v.  Carpenter,  51  N.  Y.  602. 

122  Bank  of  Chenango  v.  Hyde,  4  Cow.  567;  POWELL  v.  WATERS,  17 
Johns.  (N.  Y.)  176. 

U8  Dennlston  v.  Bacon,  10  Johns.  196. 

124  In  the  case  of  Small  v.  Smith,  1  Denlo  (N.  Y.)  583,  It  was  held  that 
where  accommodation  paper  had  been  negotiated  In  violation  of  an  agree- 
ment between  payee  and  maker,  upon  which  agreement  the  payee  had  In- 
dorsed, the  holder  could  not  recover  against  such  accommodation  Indorser, 
unless  the  note  had  been  received  in  good  faith,  for  a  valuable  consideration, 
and  without  notice  of  the  agreement.  Where  the  holder  took  such  a  note 
with  notice  of  an  agreement,  he  was  held  to  have  taken  subject  thereto. 
Warden  v.  Howell,  9  Wend.  170;  Brown  v.  Taber,  5  Wend.  5G(>;  Farmers' 
Bank  v.  Noxon,  45  N.  Y.  762;  STODDARD  v.  KIMBALL,  6  Cusli.  (Mass.)  4(19; 
DACIGETT  V.  WHITING,  35  Conn.  372;  Evans  v.  Kymer.  1  Barn.  &  Adol. 
628;  Key  v.  Flint,  8  Taunt.  21;  Gray  v.  Bank  of  Kentucky.  20  I'u.  SL  3<i5; 
DUNN  V.  WESTON,  71  Me.  270;   Hidden  v.  Bishop.  5  R.  I.  2U. 


1S2  OF   THE    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.       (Cll.    5 

ing  the  lender,  and  the  seller  of  the  paper  the  borrower/"  it  is  easy 
to  roach  the  next  logical  step  in  the  theory.  WTiere  there  is  no  limi- 
tation or  restriction  as  to  the  manner  in  which  accommodation  paper 
IS  to  be  used,  the  accommodated  party  is  at  liberty  to  sustain  his- 
credit  with  it  in  any  way  he  chooses.  He  may  appropriate  it  to  any 
purpose.  In  such  a  case  there  can  be  no  substantial  material  diver- 
eion;  *^*  and,  even  when  there  is  a  departure  from  the  express  direc- 
tions of  the  accommodation  party  in  regard  to  the  note,  it  will  some- 
times not  amount  to  a  material  diversion.  The  accommodation  party 
may,  for  instance,  direct  it  to  be  discounted  at  one  bank,  and  the 
accommodated  party  may  discount  it  at  another,^ ^^  and  generally,  if 
the  paper  has  accomplished  the  purpose  in  the  minds  of  the  parties 
at  the  time  of  giving  the  accommodation  and  answers  the  test  that 
it  has  in  no  wise  changed  the  responsibility  of  any  of  them,  the  diver- 
sion will  be  disregarded  by  the  courts  and  deemed  immaterial.^ ^* 

The  fact  that  paper  was  originally  given  for  accommodation  doea 
not  alTect  the  ordinary  rule  that  the  holder  as  against  any  one  not 
his  immediate  indorser  is  not  under  the  necessity  of  showing  that 
he  gave  value.**"  He  may  recover  the  full  amount  of  the  paper,  but 
as  to  this  the  authorities  are  conflicting,  some  holding  that  his  recov- 
ery is  limited  by  the  amount  paid.^^"  It  is  immaterial  that  the  holder 
acquired  the  paper  for  a  pre-existing  debt,^^^  or  as  collateral  secu- 
rity; although  if  he  acquired  it  as  collateral  security  he  can  recover 
from  the  accommodation  party  only  the  amount  of  the  debt.*"     A 

126  CLAFLIN  V.  BOORUM,  25  N.  E.  360,  122  N.  Y,  385;  Clark  v.  Sisson.  22 
N.  T.  312;   Newell  v.  Doty,  33  N.  Y.  83. 

i2«  Cole  V.  Saulpaugh,  48  Barb.  104;  Seneca  Co.  Bank  v.  Neass,  3  N.  Y.  442;. 
Grandin  v.  Le  Roy,  2  Paige,  509;  Mohawk  Bank  v.  Corey,  1  Hill,  514;  Aga- 
wam  Bank  v.  Strever,  18  N.  Y.  502. 

127  POWELL  V.  WATERS,  17  Johns.  (N.  Y.)  176;  Bank  of  Chenango  v, 
Hyde,  4  Cow.  (N.  Y.)  567. 

128  Duel  V.  Spence,  1  Abb.  Dec.  559;  Seneca  Co.  Bank  v.  Neass,  3  N.  Y.  442;^ 
Duncan  v.  Gilbert,  29  N.  J.  Law,  521;  JACKSON  v.  BANK,  42  N.  J.  Law,  178; 
Briggs  V.  Boyd,  37  Vt.  538;  DUNN  v.  WESTON,  71  Me.  270. 

120  MILLIS  V.  BARBER,  1  Mees.  &  W.  425;   Harger  v.  Worrall.  69  N.  Y.  370. 
i»o  Daniel,  Neg.  Inst.  §§  754-757.     As  to  the  right  of  a  purchaser  for  value 
In  general  to  recover  the  full  amount  when  less  is  paid,  post,  p.    316. 

131  GROCERS'  BANK  v.  PENFIELD,  69  N.  Y.  502;  Lord  v.  Bank,  20  Pa, 
St.  384. 

132  NASH  V.  BROWN,  Chit.  Bills  (10th  Ed.)  53;  Hilton  v.  Smith,  5  Gray 
(Mass.)  400;   Atlas  Bank  v.  Doyle,  9  R.  I.  76. 


§§  83a-83b)  conflict  of  laws.  183 

partner  has  no  right  to  make  accommodation  paper  in  the  firm  name, 
but  the  fact  that  the  paper  was  so  made  without  authority  is  no 
defense  against  a  bona  fide  purchaser.*''  Neither  is  it  a  defense 
against  a  bona  fide  purchaser  that  paper  executed  by  a  corporation 
was  accommodation  paper,  and  ultra  vires.*'*  Presentment  for  pay- 
ment is  not  required  in  order  to  charge  an  indorser  for  whose  accom- 
modation the  instrument  was  made  or  accepted,  for  the  reason  that 
he  has  no  recourse  against  any  other  party;  nor  is  he  entitled  to 
notice  of  dishonor.*"*  Payment  by  the  party  accommodated,  since  he 
is  in  fact  primarily  liable,  operates  as  a  discharge  of  the  instrument.*" 


CONFLICT  OF  LAWS. 

83a.  The  validity  of  the  contract  of  the  acceptor,  maker, 
dra-wer,  and  indorser  of  a  bill  or  note  is  determined  gener- 
ally by  the  law  of  the  place  where  the  contract  is  made. 

83b.  The  interpretation  and  obligation  of  the  contract 
of  the  acceptor,  maker,  drawer,  and  indorser  of  a  bill  or 
note  are  determined  by  the  law  of  the  place  where  the 
contract  is  made,  unless  the  contract  is  to  be  performed 
in  another  place,  in  w^hich  case  the  law^  of  the  place  of 
performance  governs, 

133  Chemung  Canal  Bank  v.  Bradner,  44  N.  Y.  680;  Beach  v.  Bank,  2  Ind. 
488;  Waldo  Bank  v.  Lmnbert,  16  Me.  416;  HOGARTH  v,  LATHAM.  3 
Q.  B.  Div.  643.  The  purchaser  is  of  course  affected  with  notice  if  there  Is 
anything  in  the  character  of  the  indorsement,  as  for  example  if  it  be  an 
Irregular  indorsement,  or  in  the  circumstances,  to  inform  him  that  the  paper 
was  given  for  accommodation.     Rand.  Com.  Paper.  §  419.     Post,  p.    322. 

184  Bird  V.  Daggett,  97  Mass.  494;  National  Bank  v.  Young,  41  N.  J.  Eq. 
531,  7  Atl.  488;  American  Trust  &  Savings  Bank  v.  Gluck,  68  Minn.  129,  70 
N.  W.  lOS.'j;  Jacobs  Pharmacy  Co.  v.  Trust  Co.,  97  Ga.  573,  25  S.  E.  171. 

186  Sharp  V.  Bailey,  9  Barn.  &  C.  44;  Miser  v.  Trovingcr,  7  Ohio  St.  2Slr 
HULL  v.  MYERS,  90  Ga.  674,  16  S.  E.  653.  See  Nog.  Inst.  L,  §§  140.  ISO.  to 
this  effect. 

i3«  LAZARUS  V.  COWIE,  3  Q.  B.  459;  COOK  v.  LISTER,  .32  Law  .1.  C.  P. 
121;  BLENN  v.  LYFORD,  70  Me.  149.  Chalm.  Bills  &  N.  art.  234.  To  this 
tjttect,  Neg.  Inst.  L  §§  200,  202.  Compare  2  Ames,  Cas.  Bills  &  N.  S23.  See 
liOftt,   p.   296. 


184  OF    THE    NATURE    OF    THK    LIABILITIES    OF    THE    PARTIES.       (Ch.   5 

Conflict  of  Laws. 

A  few  words  must  be  said  concerning  the  so-called  "conflict  of 
laws,"  in  its  effect  upon  the  rights  and  liabilities  of  the  parties  to 
negotiable  instruments.  Since  a  bill  or  note  may  be  drawn  or  made 
in  one  country,  accepted  or  payable  in  another,  indorsed  in  a  third, 
and  suit  may  be  brought  in  a  fourth,  questions  frequently  arise,  where 
the  laws  of  the  different  countries  conflict,  as  to  which  law  governs. 
Sometimes  the  governing  law  is  the  law  of  the  place  where  the  con- 
tract is  made,  or  the  lex  loci  contractus;  sometimes  the  law  of  the 
place  where  the  instrument  is  payable,  or  the  lex  loci  solutionis;  and 
sometimes  the  law  of  the  place  where  action  is  brought,  or  the  lex 
fori.  As  has  already  been  stated,^*^  the  several  states  in  this  re- 
spect stand  towards  each  other  in  the  relation  of  foreign  countries, 
and  unfortunately  the  law  of  negotiable  instruments  differs  widely 
in  the  different  states. 

Saine — Execution  and  Validity. 

The  law  of  the  place  where  the  contract  is  made  governs  the  for- 
malities of  its  execution.  This  includes  the  formal  validity  of  the 
bill  or  note  as  drawn  or  made,  and  of  the  contracts  of  the  acceptor 
and  indorsers.^"'  Thus  the  sufficiency  of  a  parol  acceptance  is  de- 
termined by  the  law  of  the  place  of  acceptance,  and  if  it  be  valid 
there  it  will  be  enforced  elsewhere,  even  in  a  state  where  an  acceptance 
must  be  in  writing.^" 

The  law  of  the  place  of  contract  also  governs  the  validity  of  the  con- 
tracts of  the  different  parties.^*"     If  the  consideration  is  legal  where 

137  Ante,  p.  24. 

188  Dacosta  v.  Davis,  24  N.  J.  Law.  319;  HYDE  v.  GOODNOW,  3  N.  Y.  266; 
Herdlc  v.  Roessler,  109  N.  Y.  127,  16  N.  E.  198;  EVANS  v.  ANDERSON,  78  111. 
558;  Moore  v.  Clopton,  22  Ark.  125;  Wood  v.  Glbbs,  35  Miss.  559;  Thayer  v. 
Elliott,  16  N.  H.  102.  Such  is  the  provision  of  the  English  Bills  of  Exchange 
Act  (section  72,  subd.  1).  The  Negotiable  Instruments  Law  does  not  deal  with 
the  conflict  of  laws. 

189  Scuddcr  v.  Banli,  91  U.  S.  406;  EXCHANGE  BANK  v.  HUBBARD,  10 
O.  C.  A.  205.  62  Fed.  112;  Hubbard  v.  Banlj,  18  C.  C.  A.  525,  72  Fed.  234; 
MASON  T.  DOUSAY,  35  111.  424;  Bissell  v.  Lewis,  4  Mich.  450.  Cf.  Hall  v. 
Cordell,  142  U.  S.  116,  12  Sup.  Ct.  154. 

KoAkers  v.  Demond,  103  Mass.  318;  DUNSOOMB  v.  BUNKER,  2  Mete. 
(Mass.)  8;  Scudder  v.  Union  Bank.  91  U.  S.  406;  Adams  v.  Robertson,  37  111. 
45.    There  is  much  conflict  as  to  whether  If  the  contract  Is  to  be  performed 


§§  83a-83b)  conflict  of  laws.  185 

the  instrument  is  executed,  it  is  valid  everywhere;  and  if  illegal 
where  executed,  it  is  invalid  everywhere.  "The  question  of  •  *  * 
validity  [of  the  contract],  as  affected  by  the  legality  of  the  consider- 
ation, or  of  the  transaction  upon  which  it  is  founded,  and  in  which 
it  took  its  inception  as  a  contract,  must  be  determined  by  the  law 
of  the  state  where  that  transaction  was  had.  No  other  law  can  apply 
to  it.  Usury,  in  a  loan  effected  elsewhere,  is  no  offense  against  the 
laws  of  Massachusetts.  ♦  *  ♦  But  when  a  usurious  or  other  illegal 
consideration  is  declared  by  the  laws  of  any  state  to  be  incapable  of 
sustaining  any  valid  contract,  and  all  contracts  arising  therefrom  are 
declared  void,  such  contracts  are  not  only  void  in  that  state,  but 
void  in  every  state  and  everywhere."  ^*^  The  harshness  of  the  rule  in 
regard  to  usury  is,  however,  modified  by  the  qualification  that  if 
the  rate  of  interest  would  be  lawful  at  the  place  of  payment  the 
parties  may  elect  as  to  the  law  by  which  the  contract  is  to  be  gov- 
erned; and  conversely  if  the  rate  of  interest  would  be  usurious  at 
the  place  of  payment,  but  is  not  usurious  at  the  place  where  the 
instrument  was  made,  the  instrument  may  be  held  valid.^*^  A  bill 
or  note  void  for  want  of  a  stamp  is  void  everywhere,  although  if  the 
stamp  is  merely  a  condition  of  its  admissibility  in  evidence  the  re- 
quirement will  have  no  effect  without  the  jurisdiction.^** 

Same — Interpretation  and  Obligation  of  Contract. 

Tb2  law  of  the  place  where  the  contract  is  made  also  governs  the 
nature,  interpretation^  and  obligations  of  the  various  contracts  of 

In  another  country  Its  laws  determine  the  validity.  See  2  Ames,  Cas.  Bills 
&  N.  255,  note  1,  and  cases  collected.  Mr.  Daniel  so  states  the  law.  Daniel, 
Neg.  Inst.  §  868. 

1*1  Akers  v.  Demond,  103  Mass.  323,  per  Wells,  J. 

142  Harvey  v.  Archibold,  1  Ryan  &  M.  184;  DEPAU  v.  HUMPHREYS,  20 
Mart.  N.  S.  (La.)  1;  POTTER  v.  TALLMAN,  35  Barb.  (N.  Y.)  182;  KILGORE  v. 
DEMPSEY.  25  Ohio  St.  413;  Vllet  v.  Camp,  13  Wis.  106;  MILLER  v.  TIF- 
FANY, 1  Wall.  310;  McKay's  Estate  v.  Bank  (Colo.  Sup.)  59  Pac.  745;  Rand. 
Com.  Paper,  §§  43,  44. 

148  Alves  V.  Hodgson,  7  Term  R.  241;  Bristow  v.  Soqucvllle,  5  Exch.  275; 
Fant  V.  Miller,  17  Grat  (Va.)  47.  If  tlie  performance  is  to  be  In  another 
couuly,  It  may  be  that  the  absence  of  a  stamp  would  be  Iramatorlal.  Daiili'l, 
Neg.  Inst.  §  915.  The  Bills  of  Exchange  Act  (section  72,  siibd.  1,  a)  enacts 
that  where  a  bill  is  Issued  out  of  the  kingdom.  It  Is  not  Invalid  by  reason  that 
It  is  not  stamped  according  to  the  law  of  the  place  of  issue. 


186  OF    THE    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.       (Ch.   5 

the  parties,  except  that  where  the  contract  is  to  be  performed  in  an- 
other place  the  law  of  that  place  governs.^** 

Accordingly  the  nature  of  the  instrument,  as  negotiable  or  non- 
negotiable,  is  as  a  rule  determined  by  the  place  where  it  is  made.^*"^ 
Thus  a  promissory  note  payable  to  bearer,  made  in  England,  is  trans- 
ferable by  delivery  in  France,  although  by  the  law  of  France  trans- 
fer by  delivery  be  inoperative.^*®  And  when  a  note  was  made  in 
Mississippi,  where  the  maker  might  set  up  equitable  defenses  against 
a  bona  fide  holder,  and  was  transferred  in  Louisiana,  it  was  held  in 
an  action  in  that  state  by  the  indorsee  that  the  maker  was  entitled 
to  the  defenses  allowed  by  the  former  state,  his  obligations  having 
been  contracted  in  the  light  of  its  law.^*^  So  where  a  note  was 
made  in  Scotland  payable  to  A,  and  hence  not  negotiable  by  English 
law,  but  negotiable  by  Scotch  law,  and  was  indorsed  in  England,  it 
was  held  by  the  Scotch  court  that  the  maker  could  not  object  to  the 
form  of  transfer,  inasmuch  as  it  was  according  to  the  law  which 
determined  the  nature  of  the  instrument.^**  If,  however,  a  note 
be  not  negotiable  according  to  the  law  of  the  place  where  it  is  pay- 
able, it  will  be  held  non-negotiable,  although  negotiable  according 
to  the  law  of  the  place  where  it  was  made.^*" 

It  follows  from  what  has  been  said  that  the  liability  of  the  maker 
of  a  note  is  governed  by  the  law  of  the  place  where  it  is  made,  and 
of  the  acceptor  of  a  bill  by  the  law  of  the  place  where  it  is  accepted, 
unless  in  either  case  the  instrument  is  payable  elsewhere,  in  which 
case  the  law  of  the  place  of  payment  will  control.  This  principle 
regulates  the  time  of  payment,  for  example  the  number  of  days  of 

144  ANDREWS  V.  POND,  13  Pet.  65;  Prentiss  v.  Savage,  13  Mass,  21; 
FANNING  V.  CONSEQUA,  17  Johns.  (N.  Y.)  511;  HYDE  v.  GOODNOW,  3  N. 
Y.  266;  Freese  v.  Brownell.  35  N.  J.  Law,  285;  Thorp  v.  Craig,  10  Iowa,  461; 
Daniel,  Neg.  Inst.  §  867;  Rand.  Com.  Paper,  §  31.  "The  general  principle  is 
that  the  law  of  the  place  of  performance  is  the  law  of  the  contract.  This  rule 
applies  to  the  operation  and  effect  of  the  contract,  and  to  the  rights  and  obliga- 
tions of  the  parties  under  it."     Akers  v.  Demond,  103  Mass.  323,  per  Wells,  J. 

146  DE  LA  CHAUMETTE  v.  BANK,  2  Bam.  &  Adol.  385;    Robertson  v 
Burdekin,   1   Ross,   Lead.   Cas.   812;    ORY  v.   WINTER,   4   Mart    (La.)   277;^ 
WOODS  V.  RIDLEY,  11  Humph.  (Tenn.)  194. 

146  DE  LA  CHAUMETTE  v.  BANK,  2  Bam.  &  Adol.  385. 

147  ORY  V.  WINTER,  4  Mart.  (La.)  277. 

148  Robertson  v.  Burdekin,  1  Ross,  Lead.  Cas.  812. 
i4»  Freeman's  Bank  v.  Ruckman,  16  Grat.  (Va.)  12a 


§§  83a-83b)  conflict  of  laws.  187 

grace,  if  any,  to  which  the  acceptor  or  maker  is  entitled.*""  A 
strong  illustration  is  found  in  a  case  where  a  bill,  drawn  in  England, 
was  accepted  by  the  drawees  in  Paris,  and  before  the  day  of  pay- 
ment, owing  to  the  outbreak  of  the  Franco-Prussian  war,  the  French 
government  passed  a  law  prolonging  the  time  of  protest  on  nego 
tiable  instruments  signed  before  its  promulgation  and  postponing 
the  time  of  payment,  and  it  was  held  in  an  action  by  the  indorsee 
against  the  drawers  that  presentment  for  payment  in  accordance 
with  this  law  was  suflScient.*"* 

The  liability  contracted  by  the  drawer  and  by  the  indorser  is  dif- 
ferent from  that  of  the  acceptor  and  maker  in  that  the  former  under- 
take to  pay  only  in  the  event  of  dishonor  and  upon  receiving  due 
notice.  They  contract  to  pay  at  the  place  of  drawing  or  of  indorse- 
ment respectively,  and  their  contracts  are  hence  governed  by  the 
law  of  the  place  where  their  contracts  are  entered  into.  Thus  where 
the  defense  of  failure  of  consideration  was  available  to  the  drawer 
according  to  the  law  of  Mississippi  where  the  bill  was  drawn,  but 
not  according  to  the  law  of  Louisiana  where  the  drawee  resided,  it 
was  held  that  the  drawer  was  entitled  to  the  defense.^"'  And  as 
there  may  be  many  indorsements,  each  made  in  a  different  state,  a 
series  of  contracts  of  indorsement  may  arise,  each  governed  by  the 
law  of  a  different  state,  and  all  differing  in  effect  one  from  an- 
other.*"* It  is  to  be  observed,  however,  that  while  the  liability  of 
the  indorser  as  against  his  immediate  and  subsequent  indorsees  up- 
on his  contract  of  indorsement  is  governed  by  the  law  of  the  place 
of  the  indorsement,  a  different  question  is  presented  as  to  the  effect 
of  the  indorsement  as  a  transfer  and  in  conferring  rights  upon  the 
transferee  and  subsequent  holders  against  the  original  parties.  As 
to  the  effect  of  the  indorsement  as  a  transfer  there  has  been  great 
diversity  of  opinion,  but  it  seems  that  under  the  decisions  the  rights 
of  the  indorsee  or  transferee  by  delivery  against  the  original  par- 
ties are  governed  by  the  law  of  the  place  where  the  prior  contract 

180  Washington  Bank  v.  Trlplett,  1  Pet.  25;  BOWEN  v.  NEWELL.  13  N.  Y. 
200;   BL0DGI':TT  v.  DURGIN,  32  Vt.  3<;i;    Walsh  v.  Dart,  12  Wis.  G35. 

»»i  ROUQUEl^rE  V.  O  VERM  ANN,  L.  R.  10  Q.  B.  525. 

"2  Wood  V.  Glbbs.  35  Miss.  5G0. 

103  Williams  v.  Wade,  1  Mete.  (Mass.)  82;  VIOLOTT  v.  PATTON,  5  Crnnch, 
1 12;  Trahue  v.  Short,  18  La.  Ann.  257;  Ingersoll  v.  Long.  4  Dev.  &  B.  (N.  C.^ 
2U3;    HUNT  T.  STAND  ART,  15  Ind.  33. 


188  OF    THE   NATURE    OF   THE    LIABILITIES    OF   THE    PARTIES.       (Ch.   5 

was  made  or  to  be  performed."*  If  the  transfer  is  good  accord- 
ing to  the  law  governing  the  contract  of  the  acceptor  or  maker  the 
transferee  may  maintain  suit  against  the  acceptor  or  maker,  but 
otherwise  not. 

By  the  place  where  the  contract  is  made  is  meant,  as  between  the 
original  parties,  the  place  where  it  is  delivered  or  issued,  not  where 
it  is  dated;  ""  but  the  place  of  date  is  prima  facie  the  place  of  is- 
sue, and  as  against  a  bona  fide  purchaser  the  instrument  will  be 
deemed  to  have  been  made  at  that  place.^"* 

Same — Damages. 

The  rate  of  interest  payable  as  damages  ^"^  is  determined  by  the 
law  of  the  place  of  performance:    in  case  of  the  acceptor  or  maker 

i»*  Robertson  v.  Burdekln,  1  Ross,  Lead.  Cas.  812;  TRIMBEY  v.  VIGNIER, 
1  Bing.  N.  C.  151;  LEBEL  v.  TUCKER,  L.  R.  3  Q.  B.  77;  BRADLAUGH  v.  DB 
RIN,  L.  R.  5  C.  P.  473.  "It  has  been  held  that  on  a  bill  drawn  and  payable  in 
England,  but  Indorsed  in  France  in  form  invalid  there,  but  valid  by  English 
law,  the  indorsee  might  maintain  suit  in  England  against  the  acceptor,  whose 
contract  is  to  be  interpreted  by  English  law;  but  as  between  the  indorsee  and 
the  indorser,  such  indorsement  would  confer  no  right  of  action,  being  governed 
by  the  law  of  France,  the  lex  loci  contractus.  In  BRADLAUCH  v.  DB  RIN 
the  exchequer  chamber  held  that  In  •  •  •  LEBEL  v.  TUCKER  and  TRIMBEY 
V.  VIGNIER  the  French  law  had  been  mistaken,  and  that  as  regards  the  point 
raised— 1.  e.,  the  right  of  an  Indorsee  under  a  blank  Indorsement  to  sue  in  his 
own  name — there  was  no  conflict  between  the  laws  of  France  and  England,  but 
the  principles  laid  down  in  those  cases  are  not  questioned."  Benj.  Chalm.  Bills 
&  N.  71,  note.  These  three  cases  are  severely  criticised  by  Prof.  Ames,  who 
maintains  that  upon  principle  the  transfer  of  a  bill  Is  governed  by  the  law 
of  the  place  where  It  is  at  the  time  of  transfer.  2  Ames,  Cas.  Bills  &  N.  807, 
808.  See  Daniel,  Neg.  Inst.  §§  903-907.  The  Bills  of  Exchange  Act  (section 
72,  subd.  2)  provides  that  the  "Interpretation  of  the  drawing,  indorsement,  ac- 
ceptance, or  acceptance  supra  protest  of  a  bill  is  determined  by  the  law  of 
the  place  where  such  contract  is  made.  Provided  that  where  an  Inland  bill  is 
Indorsed  In  a  foreign  country  the  Indorsement  shall  as  regards  the  payor  be  in- 
terpreted according  to  the  law  of  the  United  Kingdom." 

IBB  COOK  V.  MOFFAT,  5  How.  29.5;  Lawrence  v.  Bassett,  5  Allen  (Mass.) 
140;  Bell  v.  Packard,  69  Me.  105;  Freese  v.  Brownell,  35  N.  J.  Law,  286;  Gay 
T.  Rainey,  89  lU.  221;   Briggs  v.  Latham,  36  Kan.  255.  13  Pac.  393. 

!»«  Snaith  V.  Mlngay,  1  Maule  &  S.  87;   LENNIG  v.  RALSTON,  23  Pa.  St.  139. 

iBT  As  to  the  distinction  between  interest  by  way  of  damages  and  stipulated 
Interest,  ante,  p.  172,  note  83. 


§§  83a-83b)  conflict  of  laws.  189 

where  the  instrument  is  payable;  ^'**  in  case  of  the  drawer  and  in- 
dorser,  where  the  contract  of  indemnity  is  to  be  performed, — that  is, 
at  the  place  of  drawing  or  indorsing.  Thus  where  F.  in  California 
drew  bills  on  B.  in  Washington,  D.  C,  which  were  not  accepted,  and 
the  payee  brought  suit  in  England  against  the  drawer,  and  it  ap- 
peared that  the  California  rate  of  interest  was  25  per  cent.,  and  the 
Washington  rate  6  per  cent.,  it  was  held  that  the  plaintiff  was  en- 
titled to  recover  interest  at  the  higher  rate.^"®  It  would  logically 
follow  that  in  case  of  dishonor  the  drawer  or  indorser  upon  receiv- 
ing due  notice  would  be  liable  to  pay  in  performance  of  his  contract 
of  indemnity  whatever  interest  had  then  accrued  against  the  ac- 
ceptor or  maker  according  to  the  law  of  the  place  of  dishonor;  but 
that  if  the  drawer  or  indorser  failed  upon  receiving  notice  to  make 
such  payment  he  would  thereafter  become  liable  to  pay  interest  by 
way  of  damages  for  the  breach  of  his  contract  at  the  rate  in  force 
in  the  place  where  he  was  liable  to  perform  it.^®°  The  cases,  how 
ever,  generally  fail  to  take  the  distinction  between  the  interest  pay- 
able by  the  drawer  or  indorser  in  performance  and  the  interest  pay 
able  by  him  as  damages  upon  breach,  and  lay  down  the  rule  broadly 
that  the  rate  of  interest  payable  by  the  drawer  is  determined  by  the 
law  of  the  place  where  the  bill  was  drawn,  and  of  the  indorser  by 
the  law  of  the  place  where  the  instrument  was  indorsed.^'^  The 
same  rules  apply  where  there  is  a  conflict  of  laws  as  to  the  damages 
payable  in  lieu  of  re-exchange.^"* 

»B8  Cooper  V.  Earl  of  Waldegrave,  2  Beav.  282;  Scofleld  v.  Day,  20  Johns. 
(N  Y.)  102;  AUSTIN  v.  IMUS,  23  Vt  286;  Hawley  v.  Sloo,  12  La.  Ann.  815; 
Rand.  Com.  Paper,  §  41. 

160  GIBBS  V.  FREMONT,  9  Exch.  25. 

i«o  This  distinction  is  pointed  out  by  Prof.  Ames,  2  Ames,  Cas.  Bills  &  N.  819 

181  GIBBS  V.  FREMONT,  supra;  Crawford  v.  Banli,  6  Ala.  15;  Bailey  v. 
Heald,  17  Tex.  102;  Ex  parte  HEIDELBACK,  2  Low.  52G,  Fed.  Cas.  No.  6.322; 
Daniel,  Neg.  Inst.  §  920;  Chalm.  Bills  &  N.  art  222.  It  has  been  held,  how- 
ever. In  Vermont  that  the  place  of  payment  of  the  note  governs.  PECK  v. 
MAYO,  14  Vt.  33. 

162  SLACUM  V.  POMERY,  6  Cranch,  221;  LENNIQ  v.  RALSTON,  23  Pa.  St. 
137;  Hendrickis  v.  Fraukiln,  4  Johns.  (N.  Y.)  llfli 


100  OF   THE    NATURE   OF   THE    LIABILITIES    OF   THE    PARTIES.       (Ch.  5 

SaTTig — Lex  Fori. 

The  lex  fori  governs  the  remedy,  and  determines  the  form  of  ac- 
tion, in  whose  name  action  must  be  brought,  the  time  within  which 
action  may  be  brought,  questions  of  the  admissibility  of  evidence, 
and  the  like.  Where  the  foreign  law  is  relied  upon,  it  must  be  al- 
leged and  proved  as  a  fact.^" 

i«8  As  to  conflict  of  laws  in  respect  to  presentment,  protest  and  notice,  post, 
p.  402, 


S  84)  TRANSFER.  191 


CHAPTER  VI. 


84. 

Definition. 

85. 

Validity  between  Immediate  Partleii 

86. 

Methods  of  Transfer. 

87. 

By  Assignment. 

88. 

By  Operation  of  Law. 

88a-89. 

By  Negotiation. 

90-90a. 

Negotiation  by  Indorsement. 

91. 

By  Delivery. 

92. 

Overdue  Paper. 

92a. 

Right  to  Sue. 

DEFINITION. 

84.  The  transfer  of  a  bill  or  note  Is  either  the  assign- 
ment or  devolution  of  the  right  to  its  enforcement. 

Thus  far  we  have  been  considering  the  two  classes  of  contracts 
embodied  in  negotiable  bills  and  notes.  They  are  the  contract  embod- 
ied on  the  face  of  the  bill  and  of  the  note,  and  the  contract  embodied 
in  their  acceptance  and  in  their  indorsement.  We  have  examined  the 
elements  necessary  to  constitute  each  of  those  classes  of  contracts,  and 
the  nature  and  extent  of  the  obligations  that  were  assumed  by  their 
parties.  And,  because  in  this  work  we  have  only  sought  to  ai)ply 
these  rules  to  negotiable  bills  and  notes,  in  the  outset  we  examined 
and  discussed  negotiability,  its  peculiar  immunities,  and  the  reasons 
for  it,  and  in  what  ways  negotiable  instruments  were  distinguished 
from  nonnegotiable  ones. 

The  present  chapter  opens  a  new  phase  of  the  subject  The  past 
chapters  have  sought  to  explain  principally  the  legal  rules  which 
govern  and  the  relations  which  are  created  by  the  fundaxnental  con- 
tracts upon  which  the  law  of  negotiable  instruments  rests.  Tlie 
future  chapters  seek  to  explain  the  rules  which  courts  have  en- 
forced in  the  transfer  of  instruments,  and  particularly  with  refer- 
ence to  their  circulation  as  an  equivalent  for  money.  The  un(le^ 
lying  problem  before  courts  in  laying  down  these  rules  has  been 
to  determine  what  was  sound  policy  for  a  circulating  uiediinu,  and 


192  TRANSFER.  (Ch.   ^ 

also  what  was  just  and  equitable  where  Interests  and  rights  of  par- 
ties to  the  instrument  conflict.  In  this  last  respect  the  problem  dif- 
fers accordingly  as  the  parties  may  have  contracted  directly  with 
each  other  or  as  they  may  have  acquired  rights  against  other  parties 
by  virtue  of  the  transfer  of  the  instrument  For,  as  we  have  seen, 
in  many  instances  pai'ties  by  the  transfer  of  the  instrument  become 
liable  to  or  acquire  rights  against  others  of  whom  they  have  no 
knowledge  or  with  whom  they  have  had  no  business  transactions.  And 
since  most  relations  of  contract  depend  upon  the  theory  that  rights 
are  acquired  or  liabilities  are  assumed  by  virtue  of  the  express  or 
the  implied  agreement  of  the  person  enforcing  the  right  or  against 
whom  the  right  is  enforced,  it  is  obvious  that  some  system  different 
from  that  of  the  ordinary  rules  of  contract  must  be  developed.  This 
system  we  shall  examine  by  first  investigating  the  nature  of  trans- 
fer, then  the  common  defenses  which  arise  in  the  circulation  of  the 
instrument  and  their  effect  in  case  of  immediate  and  remote  par- 
ties, and  lastly  the  unique  position  in  contract  of  the  purchaser  for 
value  without  notice. 

VALIDITY  BETWEEN  IMMEDIATE  PARTIES. 

85.  As  bet-ween  immediate  parties  or  parties  privy,  any 
cause  -which  -would  invalidate  an  ordinary  contract  "will 
invalidate  the  contract  created  by  the  transfer. 

A  negotiable  instrument  containing  Indorsements  is  an  aggregate 
of  independent  contracts.  It  often  evidences  as  many  distinct 
business  transactions  as  there  are  contracts.  Each  distinct  trans- 
action may  be  widely  different  from  every  other.  And  the  legal  re^ 
lations  of  the  parties  created  by  every  individual  transaction  may  be 
as  widely  different  as  the  transactions  themselves  are  distinct. 
Ordinarily,  the  instrument  itself  shows  the  parties  who  participated 
in  a  single  transaction.  They  are  technically  spoken  of  as  "imme- 
diate parties."  Parties  who  participated  in  different  transactions 
are  called  "remote."  Ordinarily,  too,  the  instrument  itself  shows  to 
which  class  these  parties  belong.     The  maker  and  payee  of  a  note,* 

»  Puget  de  Bras  v.  Forbes,  1  Esp.  117;  JEFFERIES  r.  AUSTIN,  1  Strange, 
«74;  Kennedy  v.  Goodman,  14  Neb.  585,  16  N.  W.  834. 


§  85)  VALIDITY    BETWEEN    IMMEDIATE    PAKTIE3.  193 

the  drawer  and  acceptor  of  a  bill,'  the  indorser  and  immediate  in- 
dorsee of  a  note  or  bill,'  the  drawer  and  payee  of  a  bill,*  are  imme- 
diate parties.  The  indorsee  and  maker  of  a  note,'  or  the  indorsee 
and  one  who  Is  not  his  immediate  indorser,'  are  remote  parties. 
And  the  conclusion  to  be  drawn  from  the  instrument  itself  is  that 
the  maker  and  payee  of  a  note,  for  instance,  participated  in  one 
transaction,  while  the  third  and  fourth  indorsers  participated  in 
another,  and  perhaps  a  widely  different  one.  This  is  merely  a 
presumption,  however,  and  not  of  very  much  effect  Sometimes 
the  instrument  does  not  show  who  are  the  immediate  and  who  the 
remote  parties.  In  such  cases  the  ostensible  and  real  relations 
of  the  parties  may  be  shown.  Thus,  where  an  accommodation  note 
was  both  made  and  indorsed  for  accommodation  and  then  delivered, 
without  consideration,  to  the  plaintiff,  the  court  said  that  the  real 
relation  of  the  parties  could  be  shown,  and  that  the  lack  of  considera- 
tion between  them  was  a  complete  defense.^  The  mere  position  of 
these  parties  on  the  paper,  as  not  Immediate,  does  not  in  fact  make 
them  so.  And  the  true  nature  of  the  transaction  can  be  given  in 
evidence. 

It  once  being  determined  whether  the  parties  to  an  Instrument 
between  whom  there  is  controversy  are  immediate  or  remote,  it 
then  becomes  clear  whether  the  general  rules  of  law  applicable 
to  contracts,  or  the  peculiar  rules  and  equitable  theories  applica- 

«  Thomas  v.  Thomas,  7  Wis.  476. 

«  Easton  v.  Pratchett,  1  Cromp.,  M.  &  R.  798;  HOLLIDAY  v.  ATKINSON, 
5  Barn.  &  C.  501.  This  was  an  action  on  a  promissory  note  Indorsed  without 
consideration,  and  brought  by  the  Indorsee  after  death  of  the  giver,  against 
the  executors,  and  the  decision  was  against  an  action  lying  In  such  case,  there 
being  no  legal  consideration.  Abbott  v.  Ilendricks,  1  Man.  &  G.  7i)l;  Klein 
v.  Keyes,  17  Mo.  326. 

*  Mcculloch  v.  HOFFMAN,  lO  Hun  (N.  T.)  133.  in  this  case.  In  which 
plaintiff  was  payee  and  defendant  was  drawer.  It  was  held  competent  to  prove 
certain  facts  and  circumstances  of  Hoffman's  signature,  and  tliat  tlie  subject 
of  consideration  might  be  Inquired  Into,  since  the  action  was  between  the 
original  parties. 

6  liurnes  v.  Scott,  117  U.  S.  582,  6  Sup.  Ct.  8G5;  Chemical  Electric  Light  &. 
Power  Co.  v.  Howard.  148  Mass.  859,  2U  N.  E.  02. 

•  Etheridge  v.  Gallagher,  55  .Miss.  4G4- 
T  Powers  V.  French,  1  Hun,  582. 

NEG.BILLS.— 13 


194  TRANSFER.  (Ch.   5 

ble  to  negotiable  bills  and  notes,  apply.  If  the  parties  are  imme- 
diate, and  the  controversy  is  between  them  as  parties  to  a  distinct 
contract,  then  any  defense  which  is  sufiQcient  to  prevent  the  enforce- 
ment of  an  ordinary  contract  will  prevail."  To  them  the  theories  of 
tlie  purchaser  for  value  do  not  apply,  for  it  is  no  part  of  the  theory 
of  negotiability  that  it  should  give  immunity  to  the  person  who 
has  procured  the  instrument  through  fraud  or  misrepresentation 
or  duress,  or  through  an  illegal  consideration,  or  who  has  found  or 
stolen  it.  Negotiability,  as  a  theory,  only  aims  to  protect  innocent 
parties,  who  have  taken  the  instrument  in  ignorance  of  the  existence 
of  these  defenses,  affecting  some  contract  embodied  in  the  instru- 
ment before  the  innocent  party  takes  it.  Therefore  an  immediate 
party  to  a  contract  who  has  been  guilty  of  fraud,  misrepresentation, 
and  duress  must  suffer  as  against  him  upon  whom  he  has  committed 
such  a  wrong. 

In  general,  where  the  parties  are  remote,  then  the  theories  of 
negotiability  apply.  The  fact  of  importance  in  the  doctrine  of  nego- 
tiable instruments  is  the  presumption  in  favor  of  the  purchaser  for 
value  without  notice  necessary  to  preserve  the  instrument  as  a  cir- 
culating medium.*     The  remote  party  is  one  who  knows  nothing  of 

8  Lack  of  consideration.  Murphy  v.  Keyes,  39  N.  T.  Super.  Ct.  18;  Wilson  v. 
Ellsworth,  25  Neb.  246,  41  N.  W.  177;  KULENKAMP  v.  GROFF,  71  Mich. 
675,  40  N.  W.  57;  Macomb  v.  Wilkinson,  83  Mich.  486,  47  N.  W.  336.  But  see 
In  re  KING'S  ESTATE,  94  Mich.  411,  54  N.  W.  178;  THACHER  v.  DINS- 
MORE,  5  Mass.  299;  Hodgkins  v.  Moulton,  100  Mass.  309;  Black  v.  Ridgway, 
131  Mass.  80.  Duress,  CLARK  v.  PEASE,  41  N.  H.  414.  Fraud,  Vathir  v. 
Zane.  6  Grat.  (Va.)  246;  Rogers  v.  Morton.  12  Wend.  484.  Illegality,  Edmunds 
V.  Groves,  2  Mees.  &  W.  642;  Cummings  v.  Boyd,  83  Pa.  St.  372;  WRIGHT  v. 
IRWIN,  33  Mich.  32;  Bierce  v.  Stocking,  11  Gray  (Mass.)  174.  Loss  or  theft. 
Minis  V.  Barber,  1  Mees.  &  W.  425. 

»  It  was  held  In  an  ANONYMOUS  CASE  that  where  a  bank  bill  payable  to 
A  or  bearer  was  lost,  and  was  afterwards  found  by  X,  and  was  by  him  passed 
over  to  Y  for  value,  who  got  a  new  bill  from  the  bank  In  his  own  name,  an 
action  in  trover  for  the  first  bill  would  not  lie  against  Y.  1  Ld.  Raym.  738. 
An  action  was  brought  against  the  acceptor  by  an  indorsee,  and  the  defendant 
offered  to  prove  the  drawer's  name  forged,  but  It  was  held  that  such  proof 
would  not  be  a  defense  against  an  acceptance  which  gave  credit  to  the  bill 
JENYS  V.  FAWLER,  2  Strange,  946.  A  note  was  made  payable  to  J.  C.  In  con- 
sideration of  money  given  to  be  used  In  gambling,  and  indorsed  by  J.  O  to 
the  plaintiff  for  value.  It  was  held  that  the  plaintiff  could  not  recover,  even 
though  he  had  no  notice  of  the  use  to  which  the  money  had  been  put     BOW- 


§  85)  VALIDITY    BETWEEN    IMMEDIATE    PARTIES.  195 

the  facts  of  defense  which  have  arisen  between  immediate  parties. 
He  has  not  contracted  with  them,  and  is  ignorant  of  their  transac- 
tions. He  is  to  be  protected  in  paying  money  or  giving  value  for 
the  insti'ument  from  the  wrong  other  parties  have  committed.  The 
wrong  which  has  tainted  their  contract  does  not  vitiate  his.  He 
stands  in  the  position  of  one  fortified  by  the  doctrines  of  equity,  who 
will  be  protected  by  courts,  because  the  loss  was  not  occasioned  by 
his  act,  but  rather  that  of  some  prior  party  of  whom  he  knows  noth- 
ing.^" 

YER  V.  BAMPTON,  Id.  1155.  In  GREY  v.  COOPER,  an  action  by  Indorsee 
against  the  drawer  of  a  bill,  payable  to  W.,  who  In  turn  Indorsed  it  to  another, 
and  which  finally  came  Into  possession  of  plaintiffs  by  Indorsement,  It  was 
pleaded  in  defense  that  the  payee  was  an  infant.  Held,  that  the  drawer  was 
<;harged,  on  the  ground  that,  according  to  the  bill,  he  engaged  to  pay  to  the 
order  of  the  payee,  whoever  that  might  be.  3  Doug.  65.  In  SMITH  v.  CHES- 
TER, it  was  held  that  an  Indorsee,  in  an  action  against  an  acceptor,  must 
prove  the  handwriting  of  the  first  indorser,  as  a  bill  would  be  no  payment 
to  the  one  in  whose  favor  it  was  drawn,  xmless  Indorsed  by  him.  1  Term  R. 
654. 

10  In  PROUTY  V.  ROBERTS  the  action  was  upon  a  note  payable  to  D.  W. 
or  order,  signed  by  defendant,  and  indorsed  by  D.  W.  It  was  claimed  by 
defendant  that  there  had  been  no  legal  transfer  of  the  note,  as  it  had  been 
obtained  by  H.  &  F.  under  false  representations,  and  that  the  plaintiff  took 
the  note  with  knowledge  of  the  facts.  It  was  held  that  the  plaintiff  proved 
a  legal  title  to  the  note,  and  the  facts  stated  by  the  defendant  were  no  defense 
If  proved.  The  plaintiff  was  called  upon  to  pay  only  what  he  had  agreed,  and 
payment  to  the  plaintiff  discharged  the  debt  6  Cush.  (Mass.)  19.  In  LOWE 
V.  WALLER  an  action  was  brought  against  the  acceptor  of  a  bill,  of  which 
the  indorser,  L.,  was  also  the  maker  and  payee.  This  bill  was  Indorsed  to 
H.  &  S.,  by  whom  It  was  Indorsed  to  plaintiff.  It  was  pleaded  that  the  biH 
was  upon  a  usurious  contract  between  defendant  and  H.  &  S.  In  accordance 
with  the  principle  laid  down  In  BOWYER  v.  BAMPTON,  this  was  held  a  good 
defense.  2  Doug.  736.  In  Duncan  v.  Morrison  It  was  held  that  an  assignee 
of  note  or  bill  not  mature  takes  free  from  defenses  of  which  he  has  no  notice. 
Breese  (111.)  151.  To  the  same  effect,  see  Murray  v.  Beckwlth.  81  IlL  43;  Cook 
V.  Norwood,  106  111.  658;  Vanliew  v.  Second  Nat  Bank,  21  111.  App.  12ft; 
MILLER  V.  LARNED,  103  111.  562;  SMITH  T.  LIVINGSTONE,  111  Mass.  342; 
Gilson  r.  Stevens  Mfx.  Co.,  124  Mass.  543. 


196  TRANSFER.  (Ch.  6 

METHODS  OF  TRANSFER. 

88.  There  are  three  methods  of  transfer: 

(a)  By  assignment. 

(b)  By  operation  of  la"W. 

(c)  By  negotiation. 


SAME— BY  ASSIGNMENT. 

87.  A  bill  or  note  may  be  transferred  by  assignment,  or 
sale,  as  distinguish  ed  from  negotiation,  subject  to  the 
same  conditions  that  "wrould  be  requisite  in  the  case  of  an 
ordinary  chose  in  action." 

We  hare  already  seen  that  transfers  in  the  form  of  words  com- 
monly used  for  an  assignment  when  written  on  the  bill  or  note  are 
construed  as  indorsements  and  not  as  assignments,  unless  the  inten- 
tion between  the  parties  plainly  is  to  treat  them  as  an  assignment  in 
distinction  from  an  indorsement.  See  supra,  pp.  105  to  110.  But 
where  such  form  of  words  is  not  written  on  the  instrument,  but  is 
found  in  a  separate  paper,  and  from  its  phraseology  is  clearly  meant 
to  transfer  title,  the  plain  intention  of  the  parties  is  enforced  and  the 
title  vests  in  the  transferee  by  operation  of  assignment.^"  So  where 
a  bill  or  note  which  can  only  be  transferred  by  indorsement,  is  trans- 
ferred without  indorsement,  yet  with  intention  to  vest  title,  as  we 
shall  see  in  the  later  sections  of  this  chapter,  the  title  vests  by  assign- 
ment, and  is  different  in  its  legal  effects  from  that  passing  on  nego- 
tiation, or  according  to  the  doctrines  of  negotiability.  And  this  raises 
the  question  of  title  conferred  by  an  assignment.^* 

11  Chalm.  Bills  &  N.  art  103. 

n  Examples  are:  An  order  by  the  payee  of  a  note  on  the  maker  to  pay 
over  proceeds  to  aome  one.  Noyes  v.  Oilman,  65  Me.  589;  a  transfer  of  a  note 
or  bill  by  deed,  McClain  v.  Weldemeyer,  25  Mo.  364;  an  assignment  by  a 
separate  writing,  Morris  y.  Polllon,  50  Ala.  403;  an  order  by  a  holder  to  his 
collecting  agent  to  pay  over  proceeds,  Gayoso  Sav.  Inst.  v.  Fellows,  6  Cold. 
(Tenn.)  467;  a  bond  by  the  payee  of  a  note  In  which  he  Includes  the  note, 
Crosby  v.  Roub.  16  Wis.  645. 

i«  It  was  once  held  that  a  bill  payable  to  A  or  bearer  was  not  negotiable. 


§  87)  METHODS    OF    TRANSFER.  197 

The  effect  of  the  assignment  of  an  ordinary  contract  right  i«  that 
the  party  holding  the  right  drops  out  of  the  contract  and  another  takes 
his  place.  The  assignee  is  substituted  in  place  of  the  assignor.  And 
that  the  student  may  better  understand  the  matter,  we  will  say 
that  the  assignee,  and  every  subsequent  person  to  whom  the  contract 
comes  by  assignment,  may  be  considered  as  the  person  who  made  the 
contract  in  the  first  instance,  and  as  having  said  and  done  everything 
in  making  the  contract  which  the  original  assignor  said  or  did.  Hence 
if  the  original  assignor  said  or  did  something  which  under  the  ordinary 
law  of  contracts  would  prevent  him  from  enforcing  the  contract,  or 
asserting  his  right  against  the  other  party  to  the  original  contract,  the 
assignee,  although  he  knows  nothing  of  the  original  transaction,  may 
be  deemed  to  have  said  and  done  the  same  things.  And  further,  if 
any  subsequent  assignee  from  whom,  as  an  assignor,  the  holder  in  turn 
derives  the  contract,  has  done  anything  to  prevent  its  enforcement 
against  the  original  party,  the  last  holder  cannot  enforce  it  against  the 
original  party.  Each  assignee  takes  his  chances  as  to  the  exact  posi- 
tion in  which  any  party  making  an  assignment  of  it  stands.^*  And  as 
it  is  called  in  law,  the  assignee  takes  the  contract  subject  to  equities; 
that  is,  to  defenses  to  the  contract  which  would  avail  in  favor  of  the 
original  party  up  to  the  time  of  the  notice  of  the  assignment  given  to 

Hodges  V.  Steward.  1  Salk.  125;  NICHOLSON  v.  SEDGWICK,  1  Ld.  Ravm. 
180.  But  thase  cases  have  been  overruled.  GRANT  v.  VAUGHAN,  3  Bur- 
rows, 1516  See  Daniel,  Neg.  Inst.  S  104.  Before  the  passing  of  the  statute 
8  &  4  Anne,  c.  9,  a  promissory  note  was  held  not  assignable  or  indorsable 
over  within  the  custom  of  merchants.  BULLER  v.  CRirS,  G  Mod.  29.  See 
ante,  p.  4.  As  to  whether  inland  bills  only  were  contemplated  by  this 
statute,  see  MILNE  v.  GRAHAM,  1  Barn.  &  C.  192.  In  the  case  of  LODGE 
T.  PHELPS,  the  question  arose  as  to  whether  the  assignee  of  a  promissory 
note  given  In  Connecticut,  where  such  assignee  could  not  maintain  an  action 
In  his  own  name,  might  so  maintain  such  action  In  New  York.  It  was  held 
that  the  action  might  be  brought  in  the  assigqee's  own  name,  but  allowing  the 
defendant  every  defense  to  which  he  would  have  been  entitled  In  New  York. 
2  Caines,  Cas.  321. 

I*; CROUCH  V.  CREDIT  FONCIER.  L.  R.  8  Q.  B.  380;  Mangles  v.  Dixon,  3 
H.  L.  Cas.  735;  Llttlefield  v.  Bank,  97  N.  Y.  581;  Callanan  v.  Edwards.  32  N. 
Y.  483;  Kleeman  v.  Frisbie,  63  111.  482;  Willis  v.  Trambly,  13  .Mass.  2()4; 
SPINNING  v.  SULLIVAN,  48  Mich.  5,  11  N.  W.  758;  Lane  v.  Smith.  103  Pa. 
St.  415;  Shade  v.  Crevistou.  93  Ind.  591;  WARNER  v.  WUITTAKER.  U  Mich. 
133. 


198  TRANSFER.  (Ch.  6- 

the  person  against  whom  the  contract  is  sought  to  be  enforced.  The 
effect  of  an  assignment  in  this  respect  thus  differs  from  the  effect  of 
negotiation,  for  the  chief  difference  between  an  assignment  and  a  nego- 
tiation is,  as  already  explained  (see  sui)ra,  pp.  9  to  14),  that  the 
negotiable  contract  can  be  enforced  by  the  transferee,  without  previous 
notice  to  the  contractor,  and  without  the  risk  of  being  met  by  de- 
fenses which  would  have  been  good  against  the  assignor. 


SAME— BY  OPERATION  OP  LAW. 

88.  The  full  title  to  a  bill  or  note  passes,  without  as- 
Bignment  or  negotiation,  by  operation  of  law,  in  the  fol- 
lowing cases: 

(a)  Upon  the  death  of  the  holder,  when  the  title  vests 

in  his  personal  representative,  or 

(b)  Upon  the  bankruptcy  of  the  holder,  when  the  title 

vests  in  his  assignee,  or 
(C)  At  common  law^,  if  the  holder  is  an  unmarried  wo- 
man, upon  her  subsequent  marriage,  w^hen   the 
title  vests  in  her  husband,  or 

(d)  At  common  law,  if  a  bill  or  note   be  made   paya- 

ble   or    be    transferred    to    a    married    woman, 
w^hen  the  title  vests  in  her  husband,  or 

(e)  Upon  the  death  of  a  joint  payee  or  indorsee,  when 

the  title  vests  at  once   in  the   survivor   or  sur- 
vivors. 

By  "operation  of  law"  is  meant  that  in  the  cases  above  specified 
the  law  implies  a  transfer  where  there  is  none  by  act  of  the  parties. 
The  rules  of  law  themselves  effect  the  transfer.  The  position,  rights 
and  liabilities  of  executors  and  administrators  and  trustees  have  been 
already  sufiSciently  explained."  The  position,  rights,  and  liabilities 
of  an  assignee  in  bankruptcy  are  similar  to  theirs,  because  in  most 

15  Ante,  p.  63.  Upon  death  of  the  holder,  the  title  vests  In  his  executor  or 
administrator.  STONE  v.  RAWLINSON,  Willes,  559;  Rand  v.  Hubbard.  4 
Mete.  (Mass.)  256.  ¥^en  if  the  bill  or  note  be  sppcifieally  bequeathed. 
BISHOP  V.  CURTIS,  21  Law  J.  Q.  B.  391;   CRIST  v.  CRIST,  1  Ind.  570. 


§  88)  METHODS    OF    TRANSFER.  199 

respects  he  is  but  an  ordinary  trustee.^*  As  regards  the  position 
of  married  women  at  common  law,  there  is  not  much  to  be  said, 
because  in  England  and  in  almost  all  our  states  the  common  law  has 
been  abrogated  by  statutes  abolishing  most  of  the  old  rules.  These 
rules  were  that  at  common  law  a  married  woman,  though  she  might 
have  contracted  as  feme  sole,  was  nevertheless  by  marriage  disa- 
bled from  acquiring  the  benefits  under  the  contract.  These  be- 
longed conditionally  to  her  husband.  If  he  reduced  them  to  posses- 
sion, they  were  his  absolutely.  If  he  did  not  reduce  them  to  pos- 
session, on  his  death  they  survived  to  her  if  alive,  but,  if  dead,  to  her 
representatives.  These  rules  were  operative  in  case  of  bills  and 
notes  whether  made  payable  to  or  indorsed  to  a  married  woman. 
And  during  the  marriage,  the  husband  was  for  all  purposes  deemed 
to  be  the  holder  of  the  instrument  payable  to  the  order  of  the  wife, 
whether  it  was  made  payable  to  her  before  or  after  marriage.  As 
regards  the  joint  payee  or  indorsee,  the  rule  stated  in  the  text  is  the 
statement  of  the  contract  rule  of  survivorship,  perhaps  the  principal 
characteristic  of  the  doctrine  of  joint  right  By  this  is  meant  that 
the  order  in  the  bill  or  indorsement  and  the  promise  in  the  note  are 
made  to  all  the  promisees,  not  as  separate  individuals,  but  as  one 
legal  entity.  We  may  liken  them,  in  their  being  but  one  party  in 
ownership,  to  a  corporation,  which  may  be  composed  of  many  indi- 
\"iduals,  yet  acts  as  one,  and  which  in  case  of  the  death  of  some  of 
its  members  still  exists  and  acts  through  the  survivors.  So  with 
joint  payees  or  indorsees,  the  right  does  not  descend  to  representa- 
tives, but  passes  on  or  is  transferred  to  the  survivors,  who  have  the 
litle  to  it  and  are  entitled  to  enforce  it. 

The  title,  in  all  these  cases,  received  by  the  transferee,  is  only  that 
held  by  the  transferrer,  because  this  devolution  of  interest  by  opera- 
tion of  law  is  but  an  assignment  of  that  interest.  The  executor, 
administrator  and  assignee  in  bankruptcy  merely  stand  in  the  place 
of  the  original  owner  and  can  have  no  better  position  than  he  had.^* 
They  pay  nothing  for  the  paper,  neither  do  they  take  it  in  any  com- 
mercial transaction,  but  it  comes  to  them  as  part  of  the  holder's  prop- 
erty, to  be  collected  and  paid  over  to  the  creditors  of  the  holder  or 

!•  Title  vests  In  aaslgnee.  SMITH  v.  DE  WITl'S.  0  DowL  &  U.  120;  Dan- 
iel, Neg.  Inst.  §  2(J0. 

IT  Billings  V.  Collins,  44  Me.  27L 


200  TRANSFER.  (Ch.   G 

persons  entitled  to  it.  And  this  also  is  the  principle  governing  in 
the  reductiorf  to  possession  by  a  husband  of  the  choses  in  actiou  of  a 
v.ife,^'  and  in  the  case  of  the  survivor  of  joint  owners.^' 

SAME— BY  NEGOTIATION. 

88a.  < 'Negotiation"  means  transfer  of  a  bill  or  note 
in  the  form  and  manner  prescribed  by  the  law  merchant, 
with  the  incidents  and  privileges  annexed  thereby.* 

89.  There  are  two  modes  of  negotiation:  (a)  Negotia- 
tion by  indorsement,  and  (b)  negotiation  by  delivery. 
The  form  of  the  instrument  determines  w^hich  mode  is  ap- 
plicable." 

The  effect  of  "negotiation"  has  already  been  somewhat  discussed, 
and  will  be  further  considered  hereafter.  The  incidents  and  privileg- 
es of  negotiation  may  be  briefly  capitulated  as  follows:  (1)  The  trans- 
feree can  sue  all  parties  to  the  instrument  in  his  own  name.  (2)  CJon- 
sideration  for  the  transfer  is  prima  facie  presumed.  (3)  The  trans- 
fen'er  can,  under  certain  conditions,  give  a  good  title,  although  he 
has  none  himself.  (4)  The  transferee  can  further  negotiate  the  bill, 
with  like  privileges  and  incidents.'* 

NEGOTIATION  BY  INDORSEMENT. 

90.  A  bill  or  note  which  is  in  legal  effect  payable  to  order 
is  negotiated  by  indorsement. ** 

90a.  The  transferee  of  an  instrument  made  payable  to 
order  without  indorsement  is  the  equitable  ow^ner,  and 
takes  it  subject  to  all  the  equities  vested  in  prior  parties. 

Tlie  facts  which  determine  whether  or  not  the  instrument  is  nego- 
tiable by  indorsement  are  the  terms  of  the  face  of  the  instrument 

18  Daniel,  Neg.  Inst.  §§  257,  258. 

lo  Daniel,  Neg.  Inst.  §§  11S2,  1183.  1183a. 

20  chalm.  Bills  &  N.  art.  106. 

21  Id.  art.  108.     Cf.  Neg.  Inst.  L.  §  60. 

22  Chalm.  Bills  &  N.  art.  106. 

2  3  Chalm.  Bills  &  N.  art.  110.     Cf.  Neg.  Inst.  L.  5  60. 


§§  90-90a)  HEGOTIATION    BY    INDORSEMENT.  201 

If  the  instrument  be  to  order,  then  it  was  in  contemplation  of  the 
parties  that  the  money  called  for  was  to  be  paid  to  the  -payee,  or  to 
some  person  to  whom  he  would  direct  it  to  be  paid.**  It  would  be  a 
violation  of  the  terms  of  the  contract  to  pay  it  otherwise.  For  the 
meaning  of  the  words  "or  order"  is  that  the  original  parties  intended 
in  the  first  place  that  the  instrument  might  pass  from  the  payee  to 
some  person,  they  did  not  know  whom,  and  on  again  from  him  to  an- 
other, who  in  turn  might  transfer  it.  They  therefore  may  be  deemed 
to  promise  to  pay  its  amount  to  any  one  whatever,  provided  only  that 
such  persoii  can  show  an  order  for  its  payment.  And  thus,  as  we  have 
seen  (see  ante,  p.  105),  it  is  immaterial  whether  the  indorsement  con- 
taine  words  of  nf?gotiability  or  not,"  But  the  only  method  by  which 
thia  order  can  be  evidenced  is  an  indorsement,"  although  the  indorse- 
ment may  have  various  forms,  and  be  made  sometimes  by  the  payee  or 
indoi-se^  and  sometimes  by  persons  upon  whom  their  interests  de- 
▼olvs.*"     And  the  words  or  order  are  construed  as  an  express  power 

«*  CCCK  v.  FEI  LOWS.  7  John^.  (N.  Y.)  143;  Hedges  v.  Sealy.  9  Barb.  (N. 
T.)  21  i.  A  note  by  R.  B.  &  A.  G.,  payable  to  J.  B.,  was  Indorsed  thus:  "Pay 
the  wltbki  to  J.  R.  [Signed]  J.  B."  It  was  beld  that  the  legal  ownership  of  the 
note  was  not  transferred  to  J.  R.  by  this  indorsement,  bo  as  to  authorize  him 
to  maintain  a  suit  upon  the  note  In  his  own  name  against  the  maimers.  Rob- 
inson r.  Brown,  4  Blackf.  (Ind.)  128.  In  some  states,  by  statute,  words  of  nego- 
tiability are  not  required.     See  Rand.  Com.  Paper,  §  174. 

2B  MORE  v.  MANNING,  Comyns.  311;  EDIE  v.  EAST  INDIA  CO.,  1  Wm. 
Bl.  295,  2  Burrows,  1216;   LEAVITT  v.  PUTNAM,  3  N.  T.  494. 

2  8  In  the  case  of  BRYANT  v.  EASTMAN,  where  one  who  was  carrying  on 
business  for  himself,  but  In  the  name  of  a  company  which  had  not  been 
organized,  though  incorporated,  received  as  payment  for  a  debt  due  him  In 
■uch  business  a  note  payable  to  the  order  of  the  company,  It  was  held  that 
such  person  might  transfer  the  note  by  Indorsing  It  In  his  own  name.  7  Cush. 
(Mass.)  111.  Warder,  BushneU  &.  Glessner  Co.  v.  Gibbs,  92  Mich.  29,  B2  N. 
W.  73;  Rand.  Com.  Paper,  {  700;  Byles,  Bills  &  N.  pp.  2,  151;  Daniel,  Neg. 
Inst  §§  6fi3.  664. 

aT  The  various  forms  are  arranged  as  follows:  (1)  If  payable  to  A  or  order, 
A  must  indorse.  (2)  If  payable  to  A,  and  he  is  dead,  B,  as  executor  of  A, 
must  sign.  Thus,  in  the  case  of  STONE  v.  RAWLINSON,  it  was  held  that  the 
executor  or  administrator  of  a  person  to  whom  or  whose  order  a  bill  is  payable 
has  the  absolute  property  In  such  bill,  and  may  assign  It  to  wlioinsocver  he 
pleases,  and  such  assignee  may  maintain  an  action  In  his  own  name.  Wllles, 
659.  In  such  case  the  indorsement  of  one  of  several  en-cutors  If  good.  San- 
ders V.   Blaiu,  6  J.  J.  Marsh.  (Ky.)  440.     But  if  payable  to  A,   B.  C,  and   D, 


202  TRANSFER.  (Ch.  6 

given  the  payee  to  assifjn  only  in  case  the  payee  evidences  his  as- 
sent to  the  transfer  by  his  indorsement.^* 

There  is  a  large  class  of  cases  where,  through  accident,  forget- 
fulness.  mistake,  or  some  other  cause,  a  negotiable  instrument  is 
transferred  in  good  faith,  but  without  the  indorsement  of  the  per- 
son to  whose  order  it  is  made.  It  is  true  that  an  indorsement  of 
an  instrument  and  an  assignment  of  it  such  as  we  have  been  en- 
deavoring to  explain  are  widely  distinct.  An  indorsement  is  a  nego- 
tiation, and  carries  with  it  the  full  legal  title,  and  the  assignment  car- 
ries with  it  only  the  equitable  one.^^  And  it  was  the  doctrine  of  the 
courts  of  equity,  as  distinct  from  those  of  the  common  law,  that,  inas- 
much as  proj^rty  in  equity  could  be  assigned  without  a  writing,'" 
and  merely  by  delivery,  with  an  oral  agreement  and  an  intent  to  as- 
sign, therefore  a  court  of  equity  would  treat  a  delivery  of  the  bill  or 
note  payable  to  order,  without  indorsement,  as  an  assignment  of  it, 
or  a  transfer  of  the  title  of  the  bill  or  the  note  and  all  interest  in  it.'^ 
And  because  it  was  only  the  courts  of  equity  which  would  treat  it  as 
such  an  assignment,  and  vest  the  interest  and  right  to  the  bill  or  note 
in  the  transferee,  therefore  a  corresponding  equity  would  admit  of  rea- 

execiitors  of  A,  all  must  sign.  Johnson  v.  Mangum,  65  N.  C.  146;  SMITH  v. 
WHITING,  9  Mass.  334.  But  see  Daniel,  Neg.  Inst.  §  266.  (3)  If  payable  to 
A,  and  he  is  banljrupt,  B,  as  assignee  of  A,  must  sign.  SMITH  v.  DE  WITTS, 
6  Dowl.  &  R.  120.  (4)  If  payable  to  A,  wife  of  B,  B  must  sign.  MASON  v. 
MOIUJAN.  2  Adol.  &  E.  30;  COTES  v.  DAVIS.  1  Camp.  485.  (5)  If  payable 
to  A,  B.  C,  and  D,  a  copartnership,  any  member  may  sign  by  the  firm  name. 
Thus,  a  note,  made  paj-able  to  E.  &  R.  or  order,  was  indorsed  by  R.  In  his 
own  name  to  his  partner  E.  It  was  held- that  E.  could  not  maintain  an  action 
as  payee,  since  the  Indorsement  must  be  in  the  partnership  name.  ESTA- 
BROOK  V.  SMITH,  6  Gray  (Mass.)  570.  (6)  If  payable  to  A,  B,  C,  and  D, 
not  partners,  all  must  sign.  Thus,  a  bill  payable  to  father  and  son,  not 
partners,  was  indorsed  by  the  son  alone.  Such  Indorsement  was  held  not 
good,  as  both  payees  should  have  indorsed.  Carrick  v.  Vickery,  2  Doug.  653n. 
Cf.  Neg.  lust.  L.  S  71. 

28  NICHOLSON  V.  SEDGWICK,  1  Ld,  Raym.  180;   HODGES  v.  STEWARD, 

1  Salk.  125. 

29  P^reund  v.  Importers'  &  Traders'  Nat  Bank,  76  N.  Y.  352;   U.  S.  T.  White, 

2  Hill.  r>9. 

so  Rrij,'gs  V.  Dorr,  19  Johns.  93. 
81  Ante,  p.  — . 


§§  90-90a)  NEGOTIATION    BY    INDORSEMENT.  203 

sons  or  defenses  to  show  why  the  bill  or  note  should  not  be  paid.'* 
Hence  the  doctrine  that  a  transferee  of  a  note  made  payable  to  order 
without  indorsement  takes  it  subject  to  all  equities  attached  to  the 
note;  "  and  this  although  the  holder  was  a  bona  fide  holder  for  value. 
The  transferee  stands  in  the  position  of  an  assignee.  He  owns  the 
note.  He,  in  turn,  may  transfer  it,  but  he  owns  it  and  transfers  it  sub- 
ject to  the  rules  applicable  in  case  of  an  assignment  of  any  other  chose 
in  action.  And  although  he  subsequently  obtains  an  indorsement,  if 
he  has  in  the  meantime  acquired  knowledge  of  the  equities,^*  or  if  the 
indorsement  be  after  maturity,*"  he  still  holds  the  instrument  subject 
to  the  same  defenses.  In  the  language  of  the  Negotiable  Instruments 
Law,"  "for  the  purpose  of  determining  whether  the  transferee  is  a 
holder  in  due  course,  the  negotiation  takes  effect  as  of  the  time  when 
the  indorsement  is  actually  made." 

There  is,  indeed,  some  authority  to  the  effect  that  if  it  was  the  inten- 
tion of  the  parties  that  the  instrument  should  be  indorsed,  but  the  in- 
dorsement was  omitted  through  accident,  mistake,  or  fraud,  the  in- 
dorsement, when  subsequently  obtained,  will  relate  back  to  the  time 
of  the  delivery,  and  operate  as  if  then  given,  the  holder  standing  as  a 
bona  fide  purchaser  as  of  that  date.'^  But  it  is  doubtful,  to  siiy  the 
least,  whether  any  such  exception  can  be  reconciled  with  principle. 
The  governing  principle  is  that,  in  order  that  a  purchaser  may  take 
title  discharged  of  equities,  three  things  must  concur:     (1)  Bona  fides, 

»«  Muller  V.  Pondlr.  55  N.  T.  325;  SAVAGE  v.  KING,  17  Me.  301;  Calder 
T.  Billington,  15  Me.  398;    Southard  v.  Porter,  43  N.  H.  379. 

«3  EDGE  V.  BUMFORD,  31  Law  J.  Ch.  805;  Hedges  v.  Sealy,  9  Barb.  (N. 
T.)  214;  GOSHEN  NAT.  BANK  v.  BINGHAM.  118  N.  Y.  349,  23  N.  E.  180; 
LANCASTER  NAT.  BANK  v.  TAYLOR.  100  Mass.  18;  Clark  v.  Callison,  7 
lU.  App.  203;  Haskell  v.  Mitchell,  53  Me.  4G8;  Clark  v.  Whitaker,  50  N.  H. 
474;  CENTRAL  TRUST  CO,  v.  BANK.  101  U.  S.  G8;  OSGOOD'S  ADM'R  v, 
ARTT  (C.  C.)  17  Fed.  575. 

»*  WHISTLER  V.  FORSTER,  14  C.  B.  (N.  S.)  248.  1  Ames,  Cas.  Bills  &  N. 
341,  345.  note  1  (citing  cases);  LANCASTER  NAT.  BANK  v.  TAYLOR,  100 
Mass.  18;   Clark  v.  Whitaker,  50  N.  H.  474;   OSGOOD  v.  ARTT.  17  Fed.  575. 

«»  Haskell  v.  Mitchell.  53  Me.  4G8;  Lyon.  Potter  &  Co.  v.  Bank.  29  C.  C.  A. 
45.  85  Fed.  120. 

«•  Section  79. 

»i  Daniel.  Neg.  Inst.  §  745.  citing  Southard  r.  Porter.  43  N.  II.  .1.S0;  WAT- 
KINS  V.  MAULE.  2  Jac.  &  W.  2.37;  Hughes  v.  Nelson.  29  N.  J.  Ey.  547.  See. 
also.  Tied.  Corn.  Paper.  $  248;    BeriJ.  Clialin.  Bills  &  N.  119. 


204  TRANSFER.  (^l^-  6 

(2)  the  griving  of  value,  and  (3)  tlie  transfer  of  tlie  legal  title.  In  the 
cases  which  fall  within  this  supposed  exception,  when  the  legal  title 
18  subsequently  acquired  the  essential  element  of  bona  fides  is  want- 
ing. Indeed,  it  Is  questionable  whether  these  cases  can  be  distin- 
guished, even  upon  the  facts,  from  the  cases  which  have  established 
the  rule,  as  these  cases  generally  arose  from  mistake  or  accident  in 
failing  to  obtain  at  the  time  of  delivery  the  indorsement  which  it  was 
evidently  the  intention  of  the  parties  should  be  made.  In  the  leading 
case  of  \M3ISTLER  v.  FORSTEK/*  for  example,  the  payee  of  a  check 
made  by  the  defendant,  and  obtained  from  him  by  the  payee  by  fraud, 
gave  it  to  the  plaintiff  for  value,  but  did  not  then  indorse  it,  and,  upon 
the  want  of  an  indorsement  becoming  apparent,  the  plaintiff  went  to 
the  payee,  and  obtained  his  indorsement.  It  was  held  that  the  plain- 
tiff took  subject  to  the  defense  of  fraud.  Erie,  C.  J.,  said:  "Accord- 
ing to  the  law  merchant,  the  title  to  a  negotiable  instrument  passes 
by  indorsement  and  delivery.  A  title  so  acquired  is  good  against  all 
the  world,  provided  the  instrument  is  taken  for  value,  and  without  no 
tice  of  any  fraud.  The  plaintiff's  title  under  the  equitable  assignment 
here,  therefore,  was  to  be  rendered  valid  by  the  indorsement;  but  at 
the  time  he  obtained  the  indorsement  he  had  notice  that  the  bill  had 
been  fraudulently  obtained  by  Griffiths  from  the  defendant,  and  that 
Griffiths  had  no  right  to  make  the  indorsement."  It  is  difficult  to  see 
how,  in  the  cases  supposed  to  fall  within  the  excej)tion,  the  transferee 
could  acquire  any  greater  equities  than  were  acquired  by  the  plaintiff 
in  this  case,  or  why  in  the  one  case,  as  in  the  other,  the  equities  of 
the  transferee  must  not  be  postponed  to  the  prior  equities  of  the  de- 
fendant.** 

SAME— BY  DELIVERY. 

91.  A  bill  or  note  \i7^hich  is  in  legal  effect  payable  to 
bearer  is  neg'Otiated  by  delivery  without  indorsement.*" 

Bills  and  notes  payable  to  bearer  and  bills  and  notes  indorsed  in 
blank  are,  in  legal  effect,  the  same.    The  contract  in  the  case  of  the 

••  14  C.  B.  (N.  S.)  248. 

8»  A  bank  discounting  a  note  not  Indorsed  by  the  payee  takes  It  subject 
to  all  defenses,  though  such  indorsement  was  omitted  by  mistake,  and  was 
supplied  after  the  paper  matured.  Lyon,  Potter  &  Co.  v.  Bank,  29  C.  C.  A.  45, 
85  Fed.  120. 

4t  Chalm.  BiUs  &  N.  art  109.     Cf.  Neg.  Inst  L.  S  60. 


§  91)  NEGOTIATION    BY    INDORSEMENT.  205 

note  payable  to  bearer  imports  that  the  maker  or  acceptor  is  will- 
ing to  pay  any  one  who  may  have  it  in  his  lawful  possession.  The 
indorsement  in  blank  signifies  the  same  thing  with  regard  to  an  in- 
dorser  making  it.*^  And  the  holder  of  both  an  instrument  payable 
to  bearer  and  one  indorsed  in  blank  may  transfer  the  instrument  with- 
out indorsement.*'  Such  a  transfer  is  a  negotiation,  but  except  to 
the  extent  of  the  warranties  already  specified  (see  supra,  p.  1(12)  it 
imposes  no  liability  upon  the  transferrer;  for  bills  made  payable  to 
bearer  are  negotiable  at  common  law,  and  notes  so  made  payable 
are  recognized  by  the  statute  of  Anne;*^  and  bills  or  notes  to  pay 
A  or  bearer  are  interpreted  to  be  contracts  to  pay  the  person  so  men- 
tioned, or  the  person  to  whom  he  may  deliver  the  instrument.  The 
phrase  ''bearer"  is  descriptio  personje  for  the  legal  possessor,**  and 
the  transfer  of  title  according  to  the  terms  of  the  original  instru- 
ment is  therefore  predicated  upon  delivery  alone.  "The  courts," 
Bays  Mr.  Daniel,*'  "treat  notes  payable  to  bearer  as  if  there  were 
a  direct  line  of  contract  between  the  maker  and  the  holder,  by  what- 
ever successive  stages  of  transfer  he  may  have  derived  it;  and  it 
is  correct  to  hold  that  the  maker  is  in  direct  contract  with  him,  pro- 
vided he  becomes  the  bearer  bona  fide.  He  need  not  trace  title 
through  his  predecessors,  as  possession  is  presumptive  evidence  of 
his  right."  But  it  is  evidently  the  intention  of  the  courts  to  con- 
strue this  contract  subject  to  the  implied  condition  that  the  maker 
or  acceptor  will  pay  only  the  bona  fide  possessor.  In  other  words, 
the  original  parties  may  be  deemed  to  say,  "We  will  not  restrict  the 
payment  of  this  instrument  to  any  particular  person,  but  will  pay  it 

*i  See  supra,  p.  110.  If  a  bill  be  In  lejral  effect  payable  to  bparpr.  no  subse- 
quent holder  can  restrain  Its  negotiability  by  special  Indorsemeut.  Siuith  v. 
Clarke.  Peake,  295. 

42  BITZER  V.  WAGAR.  83  Mich.  223,  47  N.  W.  210. 

48  In  DE  LA  CIIAUMETTE  v.  BANK  OF  ENGLAND  It  appeared  that  a  cer- 
tain bank  note  had  been  stolen,  and  afterwards  came  Into  the  possession  of  a 
party  In  France,  who,  In  the  course  of  business,  sent  the  same  to  England. 
By  the  desire  of  the  one  from  whom  the  note  had  been  stolen,  it  was  converted 
by  the  hank.  In  an  action  of  trover.  It  was  decided  that  by  the  atntute  of 
Anne  such  notes  were  negotiable,  just  as  were  inland  bills,  and  thus  (l(>llvery 
to  a  bona  fide  holder  for  consideration  gave  a  good  title  a»  against  original 
holder.     2  Barn.  &  Adol.  385. 

4*  GRANT  V.  VAUGHAN,  3  Burrows,  1510. 

*»  Daniel,  Neg.  Inst,  footnote  to  8  729. 


206  TRANSFER.  (Ch.    6 

to  anybody,**  provided  such  person  be  the  bona  fide  holder."  They 
therefore  may  be  deemed  to  contract  that  the  instrument  may  be 
transferred  subject  to  the  rights  and  immunities  of  the  transfer  of 
an  instrument  transferred  by  negotiation,  and  that  the  transferee 
should  have  rights  of  an  indorsee  for  value  and  without  notice,  so 
far  as  the  admission  of  equities  is  concerned.*^  And  the  only  differ- 
ence between  the  transferrer  by  delivery  and  the  indorser  is  that  the 
transferrer,  by  declining  to  indorse,  declines  to  enter  into  a  con- 
tract of  indemnity,  and  the  transferee  relies  on  the  instrument  it- 
self, and  upon  the  implied  warranties,  by  not  requiring  an  indorse- 
ment. The  transferrer,  unless  he  violates  an  implied  warranty,  can- 
not therefore  be  compelled  to  refund  the  money  for  which  he  sold  the 
bill  or  note  if  it  prove  uncollectible.  Of  this  fact  the  transferee 
takes  the  risk  on  himself,*^  for  he  might,  by  requiring  an  indorse- 
ment, acquire  all  the  right  acquired  by  indorsement.*'  But  in  other 
respects  he  derives  the  benefit  of  all  the  rights  his  transferrer  or 
prior  parties  have  acquired;  he  derives  any  benefit  that  may  come 
from  a  purchase  in  due  course  for  value  and  without  notice,  and 
thus  is  freed  from  liability  to  defenses."*" 

*«  Bank  of  Kentucky  v.  Wister,  2  Pet.  318;  Town  of  Thompson  v.  Perrlne, 
106  U.  S.  503,  1  Sup.  Ct.  564,  568;   Thomson  v.  Lee  Co.,  3  Wall.  327. 

*T  City  of  Lexington  v.  Butler,  14  Wall.  293;  Moran  v.  Commissioners  of 
Miami  Co.,  2  Black,  722;  Mercer  Co.  v.  Racket.  1  Wall.  83;  James  v.  Chalmers, 
6  N.  Y.  209;   Beach  v.  Wise,  1  Hill,  612;   Bedell  v.  Carll,  33  N.  Y.  581. 

48  Fenn  v.  Harrison,  3  Term  R.  759;  Fydell  v.  Clark,  1  Esp.  447;  Emly  v. 
Lye,  15  East,  7;  BANK  OF  ENGLAND  v.  NEWMAN,  1  Ld.  Raym.  442.  In 
this  case  It  was  held  that:  "If  a  man  has  a  bill  payable  to  him  or  bearer,  and 
delivers  it  over  for  money  received,  without  indorsement  of  it,  this  is  a  plain 
sale  of  the  bill,  and  he  who  sells  It  does  not  become  a  new  security;  but.  If 
he  had  indorsed  It,  he  had  become  a  new  security,  and  then  he  had  been  liable 
upon  the  indorsement"     Holt,  C.  J. 

*»  Bigelow  V.  Colton,  13  Gray,  309. 

00  MILLER  V.  RACE,  1  Burrows.  452;  Mauran  v.  Lamb,  7  Cow.  (N.  T.)  174; 
GRANT  V.  VAUGHAN,  3  Burrows,  1516.  See,  also,  Daniel,  Neg.  Inst  {  814, 
and  cases  quoted;  also  section  4.  c.  37,  §  1191  et  seq. 


§  92)  OVERDUB    PAPER.  207 


OVERDUE  PAPER. 

92.  Negotiable  paper  may  be  transferred  by  indorse- 
ment or  delivery  -when  overdue. 

A  bill  or  note  does  not  lose  its  negotiability  by  dishonor;  •*  and 
jet,  by  a  curious  anomaly  as  regards  parties  prior  to  tlie  transfer, 
many  of  the  privileges  of  a  bona  fide  holder  who  receives  the  paper 
after  maturity  are  destroyed.*^  Defenses  of  payment,  of  fraud,  af 
illegality  and  failure  of  consideration,'*^  in  favor  of  the  origiual  par- 

•1  In  the  case  of  LEAVITT  v.  PUTNAM  it  was  held  that.  If  originally  ncaro- 
tlable,  a  bill  or  note  does  not  lose  such  character  by  being  dlsiiouored,  but  uiay 
still  pass  from  hand  to  hand  ad  infinitum  until  paid  by  the  drawer.  The  iu- 
dorser,  after  maturity,  writes  in  the  same  form,  and  is  bound  only  upon  the 
same  conditions  of  demand  upon  the  drawer  and  notice  of  nnnpaynient,  as  any 
other  indorser.  Thus,  the  paper  retains  the  main  attributes  of  a  proper  bill  or 
note.  In  DEUTERS  v.  TOWNSEND  it  was  held  that  a  bill  was  assignable  after 
maturity,  and  even  after  an  action  had  been  begun  upon  the  same.  5  Best  &  S. 
613.  In  AMES  v.  MERIAM  it  was  decided  that  the  rule  controlling  bills  or  prom- 
issory notes,  with  respect  to  equities  attaching,  does  not  apply  to  checks  on  a 
bank,  taken  within  a  short  time  after  their  date.  Although  payable  on  denmnd, 
they  are  not  treated  as  being  dishonored  or  overdue  on  the  day,  or  inimediaiely 
after  the  day,  of  their  date.  In  this  case  it  was  held  that  a  check  dated  .binuary 
2d  and  delivered  to  a  person  on  January  12th  was  not  overdue  and  subjict  to 
defenses  between  original  parties.  98  Mass.  21)4;  BASSEMIOKST  v.  WILBY^ 
45  Ohio  St.  333,  13  N.  E.  75;  Johns.  Cas.  Bills  &  N.  45;  Carpenter  v.  Ureen- 
op,  74  Mich.  664,  42  N.  W.  276. 

52  McCaffrey  v.  Dustin,  43  111.  App.  34,  Johns.  Cas.  Bills  &  N.  144.  See  Neg. 
Inst.  L.  §  91.     Cf.  §  92. 

88  See  collated  cases,  footnote  to  1  Ames,  Cas.  Bills  &  N.  p.  747.  In  BKoWN 
V.  DAVIES  it  was  held  that  an  overdue  note  taken  with  notes  for  n<)Mp;i\  uicnt 
on  It  was  subject  to  the  defense  of  payment  by  the  maker,  on  the  ground 
that  Its  being  so  noted  for  nonpayment  when  the  plaintiff  received  it  should 
have  put  him  on  inquiry.  3  Term  R.  80.  It  was  held  in  CROSSLEY  v.  HAM 
that  the  plaintiff,  by  taking  a  note  after  dishonor  by  nouacceptance.  took  sul)- 
Jeet  to  Infirmities  and  defenses  between  previous  parties.  13  East.  4!is.  In 
Ashurst  V.  Royal  Bank  of  Australia  it  was  held  that  where  a  note  was  Indorsed 
by  one  who  was  bankrupt  at  the  time,  and  when  overdue,  the  indorsee  takes 
no  better  title  than  that  of  his  transferror.  27  Law  T.  HW;  Howard  v.  Ames. 
3  Mete.  (Mass.)  308;  Bond  v.  Fitzpatrlck,  4  CJray  (Mass.)  89;  Fish  v.  French, 
15  Gray  (Mass.)  520.  It  is  very  generally  held,  however,  that  pajHT  tniMsiCrred 
after  maturity  is  not  subject  to  set-oCT  or  counterclaim  available  against   the 


208  TRANSFER.  (Ch.   G 

ties,  may  be  successfully  interposed  in  an  action  on  a  bill  or  note 
broup:ht  by  the  transferee  of  overdue  paper  when  they  would  have 
availed  against  his  transferrer.  As  rrofesaor  Ames  points  out,  a 
negotiable  instrument  overdue  becomes  a  mere  assignable  chose  iu 
action. , 

These  are  some  things  to  be  noted  concerning  overdue  paper  view- 
ed as  a  chose  in  action.  Prominent  among  these  is  the  fact  that  it 
is  transferred  by  indorsement  or  delivery,  as  the  case  may  be,  and 
not  by  assignment."*  The  reason  for  this  is  that  the  parties  to  the 
original  contract  contemplated  a  payment  to  order.  An  indorse- 
ment signifies  that  order,  and  transfers  the  instrument.  In  COLT 
V.  BARNARD  "  Chief  Justice  Shaw  explains  that  each  indorsement 
is  in  the  nature  of  a  new  draft  by  which  the  holder  orders  the  mak- 
er to  pay  the  contents  to  the  indorsee,  not,  indeed,  when  the  instru- 
ment by  its  terms  became  due,  but  within  a  reasonable  time.  Other 
authorities  deem  it  similar  to  an  inland  bill  of  exchange  drawn  by 
the  indorser  on  the  acceptor  of  the  bill  or  the  maker  of  the  note, 
payable  to  the  indorsee  at  sight  or  on  demand.  And,  by  analogy, 
the  duty  of  the  indorsee  of  such  an  instrument,  if  he  would  hold  the 

transferrer.  Thiis  In  the  leading  case  of  BURROUGH  v.  MOSS,  10  Barn.  &  C. 
558,  Bailey,  J.,  said:  "The  Indorsee  of  an  overdue  bill  or  note  is  liable  to  such 
equities  only  as  attach  to  the  bill  or  note  Itself,  and  not  to  claims  arising:  out  of 
collateral  matters."  And  this  rule  has  been  applied  even  where  the  transferee 
had  notice  of  the  set-off.  OULDS  v.  HARRISON,  10  Exch.  572.  The  English 
rule  has  been  widely  followed  In  this  country.  National  Bank  v.  Texas,  20 
Wall.  72.  per  Swayne,  J.;  ROBINSON  r.  LYMAN,  10  Conn.  30;  Renwicli  v. 
Williams,  2  Md.  356;  Young  t.  Shriner,  80  Pa.  St.  4G3;  Richards  v.  Daily, 
34  Iowa,  427;  Haley  v.  Congdon,  56  Vt  65;  Sargent  v.  Southgate,  5  Pick. 
(Mass.)  312;  Robinson  v.  Perry,  73  Me.  168;  Edney  v.  Willis,  23  Neb.  56,  36  N. 
W.  300.  Even  where  get-oflf  Is  allowed.  It  does  not  extend  to  debts  arising  after 
the  transfer.  In  some  states  the  matter  is  regulated  by  statute.  See.  generally, 
Daniel,  Neg.  Inst.  §§  1435-1437;  4  Am.  &  Eng.  Enc.  Law  (2d  Ed.)  315  et  seq.; 
1  Ames,  Cas.  Bills  &  N.  759. 

64  2  Ames,  Bills  &  N.  p.  853. 

»B  18  Pick.  (Mass.)  260.  In  this  case  a  note  was  Indorsed  by  the  defendant, 
who  was  the  payee,  to  plaintiff,  after  maturity.  There  was  no  evidence  of  de- 
mand of  payment  on  the  maker,  or  of  notice  to  the  defendant.  The  maker  was 
Insolvent  when  the  Indorsement  was  made,  and  had  absconded  to  New  York, 
In  which  state  a  Judgment  had  been  obtained  against  him,  which  was  unsatis- 
fied. It  was  held  that  without  demand  and  notice  the  action  could  not  be 
maintained. 


§  92)  OVERDUE    PAPER.  209 

indorser,  is  generally  determined."'  An  indorser  is  liable  as  such 
if  the  holder  i)erforms  his  duty  in  demanding  the  payment  in  a  rea- 
sonable time.'^  By  this  is  meant  such  a  time  as  would,  from  the 
particular  circumstances  of  each  case,  be  allowed  in  the  general  con- 
duct of  affairs  by  business  men. 

The  indorsee  of  a  negotiable  bill  or  note  after  maturity  takes  the 
same,  and  only  the  same,  interest  that  his  indorser  had."**  This  is 
because  it  is  a  mere  assignable  chose  in  action.  He  buys  the  right 
of  action  which  the  indorser  had  to  sell.  He  buys  not  only  the  right 
of  its  enforcement,  but  also  the  defenses  which  the  original  parties 
may  have  to  it."*'  To  give  expression  to  common  business  phrase, 
he  buys  a  lawsuit  for  whatever  it  is  worth,  with  the  chances  of  its 
success  or  failure,  as  events  may  turn.     The  reason,  as  will  be  shown 

88  Byles,  Bills,  p.  169,  note;   Patterson  y.  Todd,  18  Pa.  St.  426. 

6T  BERRY  V.  ROBINSON,  9  Johns.  (N.  Y.)  121;  LEAVITT  v.  PUTNAM,  3 
N.  Y.  494.  "Where  an  instrument  is  issued,  accepted,  or  indorsed  when  over- 
due. It  Is,  as  regards  the  persons  so  issuing,  accepting  or  indorsing  it,  payable 
on  demand."     Neg.  Inst.  L.  §  26. 

88  In  PINE  V.  SMITH,  It  was  decided  that  one  who  takes  a  promissory  note 
indorsed  oa  the  last  day  of  grace  does  so  subject  to  all  defenses  available  in 
the  hands  of  the  payee,  and  in  a  suit  against  the  maker  the  defendant  may 
prove  any  illegality  in  the  origin  of  the  note.  18  Gray  (Mass.)  82.  A  mort- 
gage given  to  secure  a  note  for  the  payment  of  four  installments  was  taken 
when  one  installment  was  due  and  not  yet  paid.  It  was  held  that.  In  a  suit 
to  foreclose,  the  defendant  might  prove  duress  as  a  defense  to  the  whole  note. 
The  note  was  dishonored  by  non-payment  of  the  first  Installment,  and  this  put 
plaintiff  on  Inquiry.  VINTON  v.  KING,  4  Allen  (Mass.)  562.  In  an  action  by 
the  indorsee  against  the  maker  of  a  note  for  $55,  it  was  held  that  the  defend- 
ant might  show,  under  a  plea  of  non  assumpsit,  that  he  had  given  the  payee  $50 
shortly  after  the  assignment,  which  the  latter  had  agreed  to  credit  on  the  note. 
The  note  In  this  case  was  paj'able  on  demand,  and  was  negotiable  two  and  a 
half  months  after  date.  LOSEE  v.  DUNKIN,  7  Johns.  (N.  Y.)  70.  See,  also, 
the  case  of  HOLMES  v.  KIDD,  3  Hurl.  &  N.  891.  As  to  negotiability  of  a  note 
payable  on  demand  after  the  lapse  of  time,  see  BROOKS  v.  MITCHELL,  9 
Mees.  &  W.  15.  As  to  burden  of  proof  in  case  of  transfer  after  maturity,  see 
Eames  v.  Crosier,  101  Cal.  260,  35  Pac.  873;   Tyler  v.  Young,  30  I'a.  St.  144. 

6»  Folsom  V.  Bartlett,  2  Cal.  163;  Wheeler  v.  Barret,  20  Mo.  573;  .MOUdAN 
▼.  U.  S..  113  D.  S.  500,  5  Sup.  Ct.  588;  Harroll  v.  Broxton.  78  C.a.  12i>,  3  S. 
E.  5:  Money  v.  Ricketts,  62  Miss.  209;  SPECK  v.  CAR  CO.,  121  111.  57,  12 
N.  E.  213;  CHURCH  v.  CLAPP,  47  Mich.  2.')7,  10  N.  W.  362;  Wood  ▼.  Mc- 
Kean,  64  Iowa,  18,  9  N.  W.  817;  Marsh  ?.  Marshall,  53  Pa,  SU  3'JU;  llaya  r. 
Kingston  (Pa.)  16  Atl.  745. 
NEG.B1LLS.-14 


210  TRANSFER.  (Ch.   6 

under  the  subject  of  "Notice,"  is  that,  when  an  indorsee  takes  an  in- 
strument overdue,  it  is  presumed  he  was  acquainted  with,  or  had  no- 
tice of,  the  circumstances  which  would  affect  the  validity  of  it  as 
against  original  parties  "°  had  it  been  in  the  hands  of  the  person  who 
was  the  holder  at  that  time.°^  He  cannot  be  treated  as  a  purchaser 
without  notice,  because  the  fact  that  the  instniment  has  not  been 
paid  when  the  acceptor  or  maker  promised  it  should  be  paid  implies 
that  there  is  some  reason  on  their  part  for  its  nonpayment.  And 
whether  he  has  inquired  for  this  reason  or  not  is  immaterial.  He 
should  have  made  such  inquiry,  and  the  law  will  hold  him  to  have 
made  it.  He  is  charged  with  notice  of  all  facts  and  defenses  he 
would  have  found  out  had  he  made  the  inquiry.®^ 

It  follows,  conversely,  from  the  rule  that  the  transferee  after  ma- 
turity takes  the  interest  of  his  transferrer,  that,  if  defenses  are  not 
available  against  the  transferrer  or  indorser  of  the  overdue  paper, 
then  the  transferee  or  indorsee  is  protected  against  them.  If  the 
right  of  action  is  perfect  in  the  transferrer  or  indorser,  the  trans- 
feree or  indorsee  buys  that  right  of  action,  and  all  of  it.®'  It  is  im- 
material that  indorsers  and  transferrers  prior  to  the  indorser  after 
maturity  had  notice,  and  were  not  in  the  position  of  the  bona  fide 
holder.  If  the  indorser  after  maturity  was  a  bona  fide  holder  for 
value,  the  instrument  was  good  in  his  hands,  and  was  free  from 
these  defenses.  A  part  of  his  title  to  the  instrument  was  his  power 
of  transferring  to  others  with  the  same  immunity.  At  the  first  bona 
fide  negotiation,  all  defenses  between  original  parties  and  parties 
having  notice  cease  to  be  valid.®* 

«o  Hayword  v.  Stearns,  39  Cal.  58;  Nay  v.  Lamb,  15  Iowa,  79;  Etlierldge 
V.  Gallagher,  55  Miss.  458. 

01  Williams  v.  Matthews,  3  Cow.  252. 

«2  Fisher  v.  Leland,  4  Cush.  (Mass.)  456;  HINCKLEY  v.  RAILROAD  CO., 
129  Mass.  61:  Marsh  v.  Marshall,  53  Pa.  St.  396;  Greenwell  v.  Haydon,  78 
Ky.  333;    Kellogg  v.  Schaalie,  56  Mo.  137;    Simpson  v.  Hall,  47  Conn.  417. 

98  It  was  held  In  BANK  OP  FT.  EDWARD  v.  WASHINGTON  CO.  BANK 
that  a  certiorate  of  deposit  was  not  dishonored  until  it  was  presented.  The 
transferee  of  such  certificate  would  take  free  from  equities.     5  Hun  (N.  Y.)  605. 

6*  Haskell  v.  Whitmore.  19  Me.  102;  CHALMERS  v.  LANION,  1  Camp.  383. 
In  this  action  by  indorsees  of  a  bill  of  exchange  against  the  acceptor,  one  of 
the  grounds  of  defense  was  that  the  bill  had  been  accepted  for  a  debt  con- 
tracted In  a  smuggling  transaction,  and  though  indorsed  for  value,  before  ma- 


§  92)  OVERDUE    PA FEB.  211 

In  some  jurisdictions,  as  we  hare  seen,"  the  fact  that  paper  is 
accommodation  paper,  without  other  reason,  constitutes  a  defense 
when  that  paper  is  transferred  when  overdue.  This  is,  indeed,  op- 
posed to  the  law  as  laid  down  in  England  and  in  many  cases  in  other 
jurisdictions,  which  declare  that  it  is  not  to  be  inferred  from  the 
fact  that  paper  is  given  for  accommodation  that  there  is  any  agree- 
ment not  to  negotiate  it  after  maturity."  There  is,  however,  a 
criticism  to  be  made  upon  this  doctrine.  It  came  up  before  the 
English  courts  on  questions  of  pleading,  and  it  certainly  seems  not 
too  much  to  say  that  the  courts  appear  to  have  decided  the  matter 
without  giving  it  a  very  thorough  consideration.  In  Sturtevaut  v. 
Ford  the  judges  held  themselves  bound  by  the  principle  of  stare  de- 
cisis, though  they  criticised  the  rule;  and  it  is  submitted,  with  def- 
erence to  the  weight  of  authority  on  the  point,  that  the  English  doc- 
trine, as  it  is  followed  in  several  states  of  the  Union,  is  not  the  wiser 
view. 

A  reasonable  presumption  as  to  the  intention  of  the  parties  would 
be  rather  that  there  was  an  understanding  between  them  that  the 
accommodated  party  should  pay  the  bill  or  note  when  due,  and  hence 
that  he  should  not  use  it  after  it  became  due;  in  other  words,  that 

turity,  to  a  bona  fide  holder,  yet  that  It  had  been  Indorsed  by  him  to  the  pres- 
ent plaintiffs  after  maturity.  It  was  held,  however,  that  If  the  bill  was  re- 
ceived from  one  who  might  maintain  an  action  upon  it,  the  fact  that  indorse- 
ment was  after  maturity  would  not  let  in  such  defense.  Smith  v.  Hlscock,  14 
Me.  449;  SOLOMONS  v.  BANK,  13  East,  135,  note;  Miller  v.  Talcott,  54  N. 
Y.  114;   Britton  v.  Hall,  1  Hilt.  52a 

8  5  Ante,  p.  179. 

«8  CIIAIiLES  V.  MARSDEN,  1  Taunt  224.  In  this  case  it  was  hold  that.  In 
an  action  by  an  indorsee  for  value  against  an  acceptor,  it  was  no  defense  that 
the  bill  was  accepted  for  the  accommodation  of  the  maker,  and  that  the  plain- 
tiff knew  this  when  he  took  the  bill  after  maturity.  Tlie  decision  in  STICIN  v. 
YGLESIAS  also  sustains  the  rule  that  a  bill  which  has  been  accepted  wlien 
overdue  is  good  in  the  hands  of  one  to  whom  it  was  transferred  when  overdue. 
This  will  not  be  true,  however,  when  the  bill  was  accepted  before  maturity, 
and  transferred  afterwards,  if  there  was  an  express  or  Implied  agreement  be- 
tween acceptor  and  the  one  accommodated  that  such  bill  should  not  be  nego- 
tiated after  maturity.  3  Dowl.  2.'>2.  To  the  same  elTect.  see  srUUTE"'A.NT  v. 
FORD,  4  Man.  &  G.  101;  BROWN  v.  MOTf,  7  Johns.  (N.  Y.)  3151;  GRANT  v. 
ELLICOTT,  7  Wend.  (N.  Y.)  227;  DUNN  v.  WESTON,  71  Me.  270;  Duvls  r. 
MiUer,  14  Grat.  (Va.)  1;    Daniel,  Neg.  Inst.  S  7S0. 


212  TRANSFER.  (Cll.  6 

the  accommodation  party  intended  to  lend  his  credit  only  until  ma- 
turity. If  the  instrument  were  transferred  after  maturity  it  would 
then  be  subject  to  the  defense  that  it  was  used  without  authority.*'^ 
This  in  no  way  varies  the  rule  that,  if  the  title  to  the  accommoda- 
tion paper  when  it  becomes  due  has  vested  in  a  holder  against  whom 
the  defense  of  want  of  consideration  will  not  avail,  then,  on  his 
transfer  of  the  paper  after  maturity,  his  assignee  takes  the  title 
which  he  himself  had.  An  accommodation  party  cannot  raise  the 
defense  of  want  of  consideration  against  a  transferee  of  overdue 
paper  who  procured  it  from  a  bona  fide  holder,  who,  in  his  turn,  ac- 
quired it  before  it  became  due." 

RIGHT  TO  SCTE. 

92a.  The  person  to  whom  a  bill  or  note  is  negotiated, 
or  to  whom  it  is  transferred  by  operation  of  la-w,  acquires 
the  right  to  sue  thereon  in  his  o^vvn  name. 

As  we  have  seen,  while  the  equitable  title  to  a  bill  or  note  is 
transferred  by  mere  assignment,  the  legal  title  can  be  transferred 
only  by  negotiation  or  by  operation  of  law.  It  follows  upon  prin- 
ciple that  only  the  transferee  by  negotiation  or  by  operation  of  law 
can  maintai^i  an  action  upon  the  instrument  in  his  own  name;  '* 
but,  as  will  be  seen,  the  authorities  are  by  no  means  agreed  upon 
this  question.  There  is,  indeed,  no  conflict  of  authority  upon  the 
proposition  that  where  an  instrument  is  in  effect  payable  to  order, 
and  has  not  been  indorsed  in  blank,  only  the  original  payee  or  the 
person  to  whom  the  instrument  has  been  specially  indorsed  can 
maintain  an  action  upon  it.'^"  It  is  in  respect  to  instruments  in  ef- 
fect payable  to  bearer  that  the  authorities  are  in  disagreement. 
The  better  view  is  that  where  an  instrument  is  payable  to  bearer 
the  action  must  be  brought  in  the  name  of  the  original  holder,  or  of 
some  one  to  whom  the  legal  title  has  been  transferred  by  delivery  of 

•T  CHESTER  V.  DORR,  41  N.  T.  279;  Bower  v.  Hastings,  3G  Pa.  St  285; 
Hoffman  v.  Foster,  43  Pa,  St.  137;   Battle  v.  Weems,  44  Ala.  105. 

•  8  ECKHERT  v.  ELLIS,  26  Hun  (N.  Y.)  6G3. 

•  »  Cf.  Neg.  Inst.  L.  i  90. 

»•  Daniel,  Neg.  Inst  8  692;  4  Am.  &  Eng.  Enc  Law  (2d  Ed.)  342. 


§  92a)  RIGHT   TO    SUE.  213 

the  instrument/*  This  includes  all  persons  who  are  rightfully  in 
actual  or  constructive  possession.  Possession,  actual  or  construct- 
ive, is  necessary.  Thus  in  EMMETT  v.  TOTTENHAM,^*  where  the 
holder  of  a  bill  which  had  been  indorsed  in  blank  died,  and  his  ex- 
ecutor, not  wishing  his  own  name  to  appear,  procured  Emmett  to 
bring  action  in  his  name  against  the  acceptor,  but  did  not  deliver 
the  bill  until  after  action  brought,  it  was  held  that  the  plaintiff,  hav- 
ing neither  actual  nor  constructive  possession,  could  not  maintain 
the  action.  But  where  the  holder  of  a  bill  indorsed  it  in  blank,  and 
delivered  it  to  A,  it  was  held  that  A,  B,  and  G  might  maintain  an 
action,  the  possession  of  A  being  the  possession  of  all.''*  Delivery 
for  the  purpose  of  enabling  the  transferee  to  sue  is  enough  to  con- 
stitute him  a  proper  plaintiff.^*  Thus  where  the  payee  indorsed  a 
biii  in  blank,  and  delivered  it  to  the  manager  of  a  bank  to  cover 
advances  by  the  bank,  it  was  held  that  the  manager  might  sue  upon 
the  bill.  Byles,  J.,  said:  "To  whomsoever  the  bill  was  intended  to 
be  indorsed,  it  clearly  was  perfectly  indorsed.  It  could  only  have 
been  intended  to  have  been  indorsed  to  the  plaintiff  or  to  his  prin- 
cipals, thi  bank.  If  it  waa  intended  to  be  indorsed  to  the  plaintiff, 
cadit  qucfcslia:  if  to  the  bank,  inasmuch  as  the  indorsement  was  in 
blank,  it  was  competent  to  them  to  hand  over  the  bill  to  their  agent 
or  nifjifage/  for  the  purpose  of  suing  upon  it  on  their  behalf."  ^°  On. 
the  oche;  hand,  many  cases  in  the  United  States  have  held  in  effect 
that  th^  holder  of  a  bill  or  note  payable  to  bearer  could  maintain 

Ti  EMIyiETT  r.  TOTTENHAM,  8  Exch.  884;  Coleman  y.  Bloflman,  7  C.  B. 
871;  Moore  v.  Maple,  25  111.  341,  Watson  v.  New  England  Bank,  4  Mete. 
(Mass.)  3i3    Hovej  v  Sebring,  24  Mich.  232.     See  2  Ames,  Cas.  Bills  &  N.  880. 

T2  8  Exch.  884. 

T»  ORD  V.  PORTAL,  3  Camp.  239.  Where  a  note  Is  specinily  Indorsed  to  A, 
hfc  cannot  strike  out  his  name,  and  Insert  that  of  his  vendee,  and  thereby  ena 
blc  the  latter  to  maintain  suit.     GRIMES  v.  TIERSOL,  25  Ind.  245. 

74  Law  V.  ParneU,  7  C.  B.  (N.  S.)  282;  LOVELL  v.  EVERTSON,  11  Johns.  (N. 
Y.)  52:  Ilaxtun  v.  Bishop,  3  Wend.  (N.  Y.)  13;  Guernsey  v.  Bums.  25  Wend. 
411;  Ancona  v.  Marks,  7  Hurl.  &  N.  G86;  Jenkins  v.  Tongue,  29  Law  J.  Exch. 
147;  Orr  v.  Lacy,  4  McLean,  243,  Fed.  Cas.  No.  10.589;  Freucfi  v.  Jarvis,  29 
Conn.  347;  Laflin  v.  Sherman,  28  111.  301;  La  Coste  v.  De  Arinns,  2  La.  2G3; 
Southard  v.  Wilson,  29  Me.  56;  LIITLE  v.  O'BRIEN,  9  Muss.  423;  Briuhum  v. 
Mareau,  7  Pick.  40;   Brigham  v.  Giinu'y,  1  Mich.  349. 

T»  Law  V.  Parnell.  7  C.  B.  (N.  S.)  282. 


214  TRANSFER.  (Ch.    6 

an  action  thereon  in  the  name  of  a  stranger/'  For  example,  in  New 
York,"  where  a  note  was  payable  to  C  or  bearer,  and  the  holder  and 
owner  brought  suit  in  the  name  of  his  transferrer  without  his  knowl- 
edge or  consent,  it  was  held  that  the  action  could  be  maintained,  the 
court  saying  that  the  owner  had  a  right  to  insert  over  the  blank  in- 
dorsement any  name  he  pleased,  and  that  the  person  whose  name 
was  inserted  would  be  deemed  on  the  record  the  legal  owner,  and 
could  sue  as  trustee  for  the  real  party  in  interest. 

In  many  states  the  question  in  whose  name  action  may  be  brought 
is  affected  by  the  enactments  of  the  various  Codes  to  the  general  ef- 
fect that  every  action  must  be  prosecuted  in  the  name  of  the  real 
party  in  interest,  except  that  an  executor,  administrator,  or  trustee 
of  an  express  trust  may  sue  without  joining  with  him  the  person 
for  whose  benefit  the  action  is  brought.  The  mere  holder  of  a  bill 
or  note,  who  has  no  interest  in  it,  is  clearly  not  the  real  party  in 
interest,  and  cannot  in  the  Code  states  maintain  an  action  as  such 
upon  it.'"  But  the  courts  have  construed  this  section  to  mean  that 
it  is  still  ordinarily  no  defense  to  a  party  sued  upon  commercial  pa- 
per to  show  that  the  transfer  under  which  the  plaintifif  holds  it  is 
without  consideration  or  subject  to  equities  between  him  and  his 
assignor,  or  colorable  or  merely  for  the  purpose  of  collection  or  to 
secure  a  debt  contracted  by  an  agent  without  suflBcient  authority. 
It  is  suflBcient  if  the  plaintiff  have  the  legal  title,  either  by  written 
transfer  or  delivery,  whatever  be  the  equities  between  him  and  his 
assignor.  But  he  must  have  the  right  of  possession,  and  ordinarily 
be  the  legal  owner.     Such  ownership  may  be  as  an  equitable  trustee^ 

'«  Gage  V.  Kendall,  15  Wend.  (N.  Y.)  640;  Mauran  v.  Lamb,  7  Cow.  174; 
Hartwell  v.  McBeth,  1  Har.  (Del.)  3G3;  Lewis  v.  Hodgdon,  17  Me.  2G7;  Gray 
V.  Wood.  2  Har.  &  J.  (Md.)  328;  Hodges  v.  Holland,  19  Pick.  43.  In  ROBIN- 
SON V.  CRANDALL,  the  notes  on  which  the  action  was  brought  were  made 
by  defendants,  payable  to  H.  W.  or  bearer.  Upon  death  of  payee,  the  plaintiffs, 
his  administrators,  appointed  in  that  state,  declared  in  New  York  on  the  notes 
as  bearers.  It  was  held  that,  although  the  plaintiffs  could  not  sue  as  foreign 
administrators,  yet,  being  the  real  owners  of  the  notes,  they  had  the  rigiit  to 
declare  and  recover  as  bearers,  and  that  it  did  not  lie  with  defendants  to  object 
to  the  plaintiffs'  want  of  Interest.    9  Wend.  (N.  Y.)  425. 

T7  Gage  V.  Kendall.  15  Wend.  (N.  Y.)  G40.  The  rule  followed  In  this  case  has 
been  changed  by  the  Code.     HAYS  v.  HATHORN,  74  N.  Y.  48G. 

»•  Parker  v.  Totten,  10  How.  Prac.  233;   Clark  v.  Phillips,  21  How.  Prac.  87. 


§  92a)  BIGHT   TO   SUE.  215 

or  it  may  have  been  acquired  without  adequate  consideration,  but 
it  must  be  sui33cient  to  protect  the  defendant  upon  a  recovery  against 
him  from  a  subsequent  action  by  the  assignor.'"  Thus  a  receiver 
may  sue,*"  but  an  agent  to  collect  may  not,  because  he  has  neither 
the  legal  title  nor  is  the  trustee  of  an  express  trust,*^  although,  if 
the  agent  were  named  as  payee  in  the  note,  he  would  be  the  trustee 
of  an  express  trust."  But  a  donee  may  sue,  because  the  legal  title 
passes  by  gift,  irrespective  of  the  question  of  consideration;  ®^  or  a 
person  holding  collaterals  for  the  benefit  of  creditors,  because  the 
legal  title  passes  by  assignment,  and  he  also  is  a  trustee  of  an  ex- 
press trust;**  and  each  and  all  of  these  persons  may  legally  dis- 
charge the  liability  of  the  defendants  upon  the  instrument. 

T»  HAYS  V.  HATHORN.  74  N.  Y.  486;  Eaton  v.  Alger,  47  N.  Y.  345;  Webb 
T.  Morgan,  14  Mo.  428;   Boyd  v.  Corbitt,  37  Mich.  52. 

80  Merchants'  Loan  &  Trust  Co.  v.  Clair,  36  Hun,  362. 

81  Iselin  V.  Rowlands,  30  Hun,  488;  Rock  Co.  Nat.  Bank  v.  Hollister,  21 
Minn.  385;  Third  Nat  Bank  v.  Clark,  23  Minn.  263.  As  to  right  of  agent  for 
collection  to  sue,  see  ante,  p.  125,  note  65.  "A  restrictive  indnrsement  confers 
upon  the  indorsee  the  right  *  *  •  to  bring  any  action  thereon  that  the 
indorser  could  bring."     Neg.  Inst.  L.  §  67. 

88  Hollingsworth  v.  Moulton,  53  Hun,  91,  6  N.  Y.  Supp.  362;  Hoxie  T.  Kenne- 
dy, 10  N.  Y.  St.  Rep.  786. 

8s  Prltchard  v.  HIrt,  39  Hun,  378. 
•*  Nelson  r.  Edwards,  40  Barb.  279. 


216  DEFENSES.  (Ch.  7 


CHAPTER  VII. 

DEFENSES   COMMONLY  INTERPOSED   AGAINST  A   PURCHASER  FOB 
VALUE  WITHOUT  NOTICE. 

93.     Real  and  Personal  Defenses. 
94-107.  Real  Defenses. 

108-121.  Personal  Defensea 

REAL  AND  PERSONAL  DEFENSES. 

93.  The  defenses  interposed  by  a  party  to  a  bill  or  note 
in  a  suit  brought  by  a  holder  against  him  are  commonly 
of  t^wo  classes: 

(a)  REAL — Or  those  that  attach  to  the  instrument  it- 

self and  are  good  against  all  persons. 

(b)  PERSONALi — Or  those  that  grow  out  of  the  agree- 

ment or  conduct  of  a  particular  person  in  re- 
gard to  the  instrument  which  renders  it  ineq- 
uitable for  him,  though  holding  the  legal  title, 
to  enforce  it  against  the  defendant,  but  w^hich 
are  not  available  against  bona  fide  purchasers 
for  value  without  notice.* 

The  next  two  chapters  develop,  so  far  as  can  here  be  developed, 
the  position  in  contract  law  of  the  purchaser  for  value  without  no- 
tice. He  stands  alone,  in  that  the  law  will  enforce  his  rights  against 
certain  defenses,  which  would  avail  against  him  were  they  inter- 
posed in  any  other  kind  of  contract  than  a  negotiable  instrument. 
It  is  not  sought  to  give  a  statement  of  all  the  defenses  involved  in 
cases  of  commercial  paper.  It  is  neither  desirable  nor  possible  to 
give  an  adequate  statement  of  all  the  defenses  which  are  interposed 
against  even  a  bona  fide  holder.  It  is  sought  to  classify  only  the 
common  defenses,  and  to  state  the  main  rules  concerning  them,  and 
the  reasons  for  these  rules. 

In  general,  this  classification  shows  that  a  bona  fide  holder  can 

»  2  Ames.  Cas.  Bills  &  N.  p.  812.  The  classification  of  Prof.  Ames  has  been 
adopted.     Id.  p.  8GG. 


§93)  REAL  AND  PERSONAL  DEFENSES.  217 

recover  when  the  defense  interposed  is  a  personal  defense,  but  can- 
not recover  when  the  defense  is  real.  In  the  case  of  immediate  par- 
ties, all  defenses  are  available,  because  each  independent  contract  is 
governed  by  the  general  laws  of  contract.  In  the  case  of  remote 
parties,  where  the  holder  enforcing  the  instrument  is  a  purchaser  for 
value  without  notice,  a  personal  defense  cannot  be  successfully  in- 
terposed, and  only  the  real  defenses  are  allowed  by  the  courts. 

With  real  defenses  the  right  sought  to  be  enforced  has  never  ex- 
isted, or  has  ceased  to  exist.  They  are  called  "real  defenses"  be- 
cause they  attach  to  the  res  or  thing,  irrespective  of  the  conduct 
or  agreement  of  the  parties  to  it.  It  cannot  be  enforced  by  the 
holder  because  there  is  no  contract  to  enforce.  Personal  de- 
fenses, in  contrast  to  this,  are  founded  upon  the  act,  conduct,  or 
agreement  of  the  parties  with  reference  to  the  instrument  The 
instrument  with  them  has  a  legal  inception,  and,  as  an  instrument, 
is  a  binding  obligation.  But,  as  between  immediate  parties,  the 
courts  will  not  grant  a  remedy,  because  the  plaintiff  in  the  ac- 
tion— the  party  seeking  its  enforcement  in  the  suit — has  violated 
some  right,  or  failed  in  some  duty,  so  that  he  has  no  standing  in 
court  Hence,  while  the  instrument  is  in  form  a  binding  instru- 
ment, the  person  enforcing  it  has  no  rights  which  a  court  of  justice 
will  recognize.  The  reason  for  the  failure  in  its  enforcement  is 
therefore  not  real,  but  personal.  But  remote  parties  stand  upon 
another  footing  so  far  as  personal  defenses  are  concerned.  The 
elements  which  distinguish  them  in  legal  theory  from  immediate 
parties  are  consideration  and  notice.  In  this  the  principle  of  the  law 
merchant  is  the  ancient  principle  of  equity  that  where,  in  the  trans- 
fer of  title,  a  person  has  acquired  a  title  and  paid  a  valuable  consid- 
eration without  any  notice  of  an  equity  actually  existing  in  favor  of 
another,  the  former  may  by  that  means  obtain  a  perfect  title,  and 
holds  the  property  freed  from  the  prior  outstanding  equity."  "One 
who  purchases  a  legal  title,"  says  Professor  Ames,*  "for  value  and 
without  notice,  takes  the  title  discharged  of  all  equities  to  which  it 
was  subject  in  the  hands  of  his  vendor.  •  •  •  For  an  equity, 
being  in  its  nature  a  claim  in  personam,  and  not  in  rem,  can  be  en 

«  Pom.  Eq,  Jur.  §  591;  Le  Neve  v.  Le  Neve,  2  Amb.  436,  2  Lead-  Cas.  Ecj, 
(4th  Am.  Ed.)  109. 

»  2  AuiL'S,  Cas.  Bills  &  N.  p.  880. 


218  DKKENSKS.  (Ch.   7 

forced  only  af]:ainst  a  party  to  the  transaction  in  which  the  equity 
arises,  or  some  one  in  privity  with  that  party.  The  transfer  of  bills 
and  notes  by  virtue  of  their  negotiability  is  governed  by  the  same 
principle."  A  jmrchaser  for  value  without  notice,  therefore,  ac- 
quires a  title  free  from  so-called  "personal"  defenses. 


SAME— REAL  DEFENSES. 

9  4.  Common  real  defenses  are — 

(a)  The  incapacity  of  the  defendant  to  make  the    con- 

tract. 

(b)  Illegality,  ^rhen  the  contract  is    declared   void   by 

statute. 

(c)  The  discharge  of  the  instrument  by  alteration. 
The  incapacity  of  the  defendant   is   usually  due    to   in- 
fancy, coverture,  lack  of  understanding,  or  incapacity  of 
a  corporation  to  contract. 

INFANCY. — A  negotiable  instrument  or  its  indorse- 
ment made  by  an  infant  is  voidable,  not  void. 

It  was  the  opinion  of  Lord  Mansfield  *  and  of  the  bench  of  which 
Chancellor  Kent  was  chief  judge  ^  that  a  negotiable  instrument 
given  by  an  infant  was  void,  even  though  it  was  given  for  necessa- 
ries. The  reason  upon  which  these  great  jurists  and  the  judges  who 
followed  them  •  based  their  opinion  was  that,  if  the  instrument  be 
valid  as  a  negotiable  one  in  the  first  instance,  the  consideration 
could  not  be  inquired  into  when  it  came  into  the  hands  of  a  bona 
fide  holder,  and  the  infant  would  thereby  be  precluded  from  ques- 
tioning the  consideration.  Thus,  the  instrument  could  not  be  void- 
able and  remain  negotiable.     It  must  be  either  void  or  good. 

*  BUROESS  V.  MERRILL,  4  Taunt.  4GS;  WILLIAMSON  v.  WATTS,  1  Camp. 
552.  In  this  case.  Lord  Mansfield  said:  "This  action  certainly  cannot  be 
maintained.  The  defendant  is  allowed  to  be  an  infant;  and  did  any  one  ever 
hear  of  an  infant  being  liable  as  acceptor  of  a  bill  of  exchange?  The  replica- 
tion Is  nonsense,  and  ought  to  have  been  demmTed  to." 

»  Swasey  v.  Vanderheyden,  10  .Johns.  3.3. 

e  M'Crillis  v.  How.  3  X.  H.  348;  McMinn  v.  Richmonds,  6  Yerg.  9;  Morton 
V.  Steward,  5  111.  A  pp.  oo3. 


§  94)  REAL    AND    PERSONAL    DEFENSES.  219 

This  doctrine  is  certainly  not  now  the  law  in  its  entirety.  It  is 
settled  that  between  immediate  parties,  the  infant  being  one,  the 
instrument  is  voidable,  and  not  void.''  This  means  that  the  infant 
may  ratify  or  repudiate  it,  as  he  sees  fit.  But  in  case  of  remote 
parties  the  question  is  a  more  complicated  one.  The  rule  un- 
doubtedly is,  that  a  bill  or  note,  to  be  negotiable,  must  be  payable 
absolutely  and  at  all  events.  And  one  argument  is  that,  since  an 
infant's  bill  or  note  is  voidable  and  contingent  upon  his  ratification 
of  it,  it  cannot  be  negotiable.  Yet  it  is  admitted  that  if  the  infant, 
on  his  majority,  choose  to  ratify  the  instrument  to  an  indorsee,  there 
is  no  reason  why  he  should  not  be  bound.'  The  reasons  of  the  text 
writers  thus  confronted  with  conflicting  principles  are  not  clear. 
On  the  one  hand,  there  can  be  no  doubt  that  the  position  of  the  pur- 
chaser for  value  without  notice  is  inferior  in  grade  of  right  to  that 
of  an  infant.  The  purchaser  cannot  maintain  that  the  contract, 
although  voidable,  nevertheless  is  still  valid  on  reaching  his  hands, 
because  not  disaffirmed,  and  that,  therefore,  his  equity  is  superior 
to  that  of  the  infant.  In  all  of  the  cases  where  this  doctrine  has 
been  applied  to  voidable  contracts  transferred  to  a  bona  fide  trans- 
feree, its  fundamental  reason  is  laches,  and  laches  is  not  allowed  to 
prejudice  an  infant's  rights.  In  analogous  cases,  too,  the  decisions 
of  courts  are  against  the  purchaser  for  value  without  notice.  For 
example,  the  equity  of  such  a  purchaser  in  cases  of  personal  prop- 
erty '  or  of  real  property  ^**  does  not  prevail  against  the  right  of  the 
infant  to  rescind  the  contract.  And  a  similar  doctrine  is  probably 
applied  to  the  purchaser  for  value  of  a  negotiable  instrument.^^ 
And  thus  the  facts  stand  that  the  instrument  cannot  be  negotiable, 
and  yet  it  may  vest  by  indorsement  a  perfect  title  in  the  transferee, 

T  GOODSELL  v.  MYERS,  3  Wend.  (N.  Y.)  480;  Everson  v.  Carponter,  17 
Wond.  (N.  Y.)  419;  Martin  v.  Mayo,  10  Mass.  137;  Whitney  v.  Dutch.  14 
Mass.  457;  Reed  v.  Batchelder,  1  Mete.  (Mass.)  559;  Taft  v.  Sergeaut,  18 
Barb.  320;   Hodges  v.  Hunt,  22  Barb.  150. 

8  Hunt  V.  Massey,  5  Barn.  &  Add.  902;  Lawson  v.  Lovojoy,  8  Groeul.  405; 
Edgerly  v.  Sliaw.  5  Fost.  (N.  H.)  514. 

»  Hill  V.  Anderson,  5  Sniedes  &  M.  210. 

10  Mu.stard  v.  Wohlford's  Heirs,  15  Grat  329;  Harrod  v.  Myers,  21  Ark. 
592;  Jenkins  v.  Jenkins,  12  Iowa,  195;  Miles  y.  Lingerman,  24  lud.  385;  Siius 
V.  Smith.  80  Ind.  577;    Bufhanan  v.   Hubbard,  00  lud.  1. 

11  Howard  v.   Siuipkius,   TO  (Ja.  322. 


220  DEFENSES.  (Ch.  7 

and  may  be  enforced  provided  the  infant  ratify  it  on  coming  of  age; 
otherwise  if  he  disattirra  it,  and  return  the  consideration.  This  rule 
does  not  include  a  bill  or  note  given  for  necessaries,  which  is  prob- 
ably binding  in  every  one's  hands,^*  or  cases  when  the  infant  him- 
self does  not  raise  in  his  own  behalf  the  point  of  non-age;  ^*  and,  of 
course,  it  does  not  apply  where  the  infant  ratifies  the  instrument  on 
coming  of  age. 

The  infant,  as  an  indorser,  is  no  more  liable  than  as  maker  or  ac- 
ceptor. His  indorsement  in  such  case  is  also  voidable,  and  not  void. 
This  means  not  only  that  the  infant  is  not  liable  upon  the  implied 
contract  of  indemnity  unless  he  chooses  to  be;  but,  according  to 
Judge  Story,**  it  means  also  that  the  infant  may  intercept  the  pay- 
ment to  the  indorsee  by  disaffirming  the  contract,  and  returning  the 
consideration,  and  recover  the  money  called  for  in  the  instrument  of 
the  maker  or  acceptor.  If  the  disaffirmance  is  made  before  pay- 
ment to  an  indorsee,  it  is  a  defense  against  the  indorsee.  If  made 
after  payment,  and  the  infant  is  payee,  the  acceptor  or  maker  must 
pay  the  money  twice,  because  they  have  warranted  the  capacity  of 
the  infant  If  parties  prior  to  the  infant  receive  notice  of  the  in- 
fant's disaffirmance,  they  are  discharged  as  to  the  parties  subse- 
quent to  the  infant,  because  these  persons  have  lost  their  title  to 
the  paper  by  the  avoidance  of  the  indorsement,  and  they  must  look 
to  their  intermediate  warranties  to  protect  themselves.  But,  ex- 
cept as  against  himself,  the  indorsement  is  effectual  as  to  all  par- 
ties; and  neither  the  maker,  acceptor,  nor  any  other  party  can  re- 
fuse to  pay  the  instrument  on  the  ground  that  an  intermediate  in- 
dorser is  an  infant.** 

u  Earle  v.  Reed,  10  Mete.  (Mass.)  387;  Dubose  v.  WTieddon,  4  McCord  (S. 
C.)  221;  Ilaine's  Adm'rs  v.  Tarrant.  2  Hill  (S.  C.)  400.  See,  contra,  TKUEMAN 
v.  HUKST,  1  Terra  R.  40;   WILLIAMSON  v.  WATTS,  1  Camp.  552. 

18  Hastings  v.  Dollarhlde.  24  Cal.  195;  NIGHTINGALE  y.  WITHINGTON, 
15  Mass.  272. 

14  Story,  Prom.  Notes,  §  80. 

"GREY  T.  COOrER.  3  Doug.  65;  Frazler  T.  Massey,  14  Ind.  382.  Story, 
Prom.  Notes,  §§  80-85;  Tied.  Com.  Paper.  §  49;  Daniel,  Neg.  Inst.  §  228.  "The 
Indorsement  or  assignment  of  the  Instrument  by  *  •  *  an  infant  passes 
the  property  therein,  notwithstanding  that  from  want  of  capacity  the  •  •  ♦ 
Infant  may  incur  no  liability  thereon."     Neg.  Inst.  L.  §  41. 


§  95)  REAL    AND    PERSONAL    DEFENSES.  221 

95.  COVERTURE. — At  common  law  a  negotiable  instru- 
ment or  an  indorsement  made  by  a  married  "wroman  -was 
not  voidable,  but  void.  This  rule  has  been  modified  by- 
statutes  in  most  jurisdictions. 

The  above  is  an  eniinciation  of  the  rule  of  the  common  law,  now 
almost  obsolete.  The  reason  for  the  rule  wherever  it  exists  is  that, 
according  to  the  former  doctrine  of  the  marriage  relation,  the  wife 
merged  her  personality  in  that  of  her  husband,  and  had  therefore 
no  capacity  to  contract  apart  from  him.  If  a  bill  or  note  was  made 
payable  or  indorsed  to  her  before  marriage,  it  became  her  husband's 
property  on  marriage;  and  if  after  marriage,  then,  by  virtue  of  the 
operation  of  the  law,  it  became  her  husband's.  So  a  married  woman 
could  not  indorse,  not  only  because  she  had  no  capacity  to  do  so,  but 
also  because  the  instrument  was  not  hers  to  indorse,  but  was  the 
property  of  hei*  husband.**  But  the  legal  relations  of  married 
women  at  the  present  day  are  changing.  The  statutes  of  the  vari- 
ous states  aro  constantly  enlarging  their  property  rights,  and  it  will, 
without  doubt,  soon  be  the  law  in  most  of  the  states  of  the  Union 
that  married  women  may  contract  in  all  respects  as  if  single,  and 
that  cov^ertuii  will  be  no  defense  to  suits  upon  negotiable  instru- 
ments. 

i«  Thus,  In  CONNOR  v.  MARTIN,  1  Strange,  516,  where  the  plaintiff  de- 
clared upon  a  promissory  note  made  to  a  feme  covert,  and  Indorsed  by  her  to 
him,  judgment  was  given  for  the  defendant,  the  right  being  in  point  of  law 
vested  In  the  husband,  and  the  wife  having  no  power  to  dispose  of  it  In 
BARLOW  V.  BISHOP,  1  East,  432,  it  was  held  that  though  a  note  were  given 
to  a  married  woman,  knowing  her  to  be  such,  with  intent  that  she  should 
Indorse  It  to  the  plaintiff  in  payment  of  a  debt  which  she  owed  him  (in  the 
course  of  carrying  on  a  trade  in  her  own  name  by  the  consent  of  her  luisband), 
yet  the  property  in  the  note  vested  in  the  husband  by  the  delivery  to  the  wife, 
and  no  Interest  passed  by  her  indorsement  to  the  plaintiff.  Where  a  bill 
of  exchange  was  payable  to  a  feme  sole,  who  Intermarried  before  the  same 
was  due.  It  waa  held  that  the  husband  might  sue  In  his  own  name  without 
Joining  the  wife,  although  the  latter  had  not  Indorsed  the  bill.  McNElLAGB 
T.  HOLLOW  AY,  1  Bam.  &  Aid.  218. 


222  DEFENSES.  (Ch.  7 

96.  CORPORATIONS. — In  the  United  States  private  cor- 
porations, unless  restrained  by  charter,  have  capacity  to 
draw,  accept,  make,  and  indorse  bills  and  notes. 

97.  The  bill  or  note  of  a  corporation,  and  its  indorse- 
ment thereon,  although  it  have  capacity  to  issue  nego- 
tiable paper,  is  unenforceable,  except  in  favor  of  a  bona 
fide  purchaser,  unless  made  or  transferred  for  the  pur- 
poses of  its  incorporation. 

98.  The  indorsement  or  assignment  of  the  instrument 
by  a  corporation  passes  the  property  therein,  notwith- 
standing that  from  want  of  capacity  the  corporation  may 
incur  no  liability  thereon.* 

A  corporation  is  defined  as  an  artificial  being  created  by  law, 
composed  of  individuals  united  into  one  body  under  a  collective 
name,  with  the  capacity  of  perpetual  succession,  and  of  acting  as  a 
natural  person  within  the  scope  of  its  charter.  It  is  one  of  the  busi- 
ness methods  by  which  men  enlarge  the  effectiveness  of  property. 
For  in  business  property  or  capital  is  the  motive  power;  men's 
brains  and  hands  the  great  machinery  for  earning  money.  And 
by  the  business  contrivances  of  agencies,  partnerships  and  corpora- 
tions, a  man's  capital  may  be  busy  earning  money  in  ways  of  which 
the  owner  knows  nothing.  The  agent  and  partner  is  a  man's  other 
business  self  in  the  enterprise  in  which  the  agency  or  partnership  is 
involved.  But  a  corporation  is  of  a  somewhat  different  character. 
Frequently  a  large  number  of  persons  having  money  whose  invest- 
ment they  cannot  personally  supervise,  aggregate  their  separate  cap- 
itals in  one  enterprise,  some  furnishing  more,  some  less,  the  capital 
being  evidenced  by  what  is  called  "stock,"  the  owners  being  called 
the  "stockholders."  This  aggregate  capital  is  invested  in  given 
business  enterprises,  and  employed  in  ways  expressly  formulated  by 
legislatures.  For  the  purpose  of  carrying  out  these  legislative  de- 
signs, officers  are  chosen  by  the  stockholders  from  among  their  own 
number,  called  "trustees"  or  "directors,"  and  from  these  in  turn,  gen- 
erally, the  administrative  function  is  created,  consisting  of  an  execu- 

*  This  is  the  language  of  Neg.  Inst  L.  $  41.  See,  also,  Chalm.  Bills  &  N. 
art  GS. 


§§  96-98)  REAL    AND    PERSONAL    DEFENSES.  223 

tive  called  a  "president"  or  a  "secretary"  or  "managing  agent,"  or 
Bome  similar  name,  to  supervise  and  direct  the  investment  of  the 
capital  furnished  by  the  stockholders,  and  execute  generally  the 
business  of  the  corporation.  The  business  of  the  corporation  is  not, 
however,  carried  on  in  the  name  of  its  administrative  or  executive 
officers,  directors,  or  stockholders.  The  aggregate  capital  is  created 
into  a  distinct  legal  being  and  becomes  like  an  ordinary  person  in  all 
its  legal  dealings.  It  takes  a  name  of  its  own.  It  acts  through  the 
instrumentality  of  its  executive  officers,  as  though  it  had  a  mind  of 
its  own.  And  people  buy  from  and  sell  to  it,  and  contract  with  it,  as 
though  it  were  itself  an  acting  sentient  person. 

The  law  which  creates  this  artificial  person  makes  it  the  au- 
thorized agent  of  the  investing  capitalist  to  do  certain  things  only. 
These  general  purposes  are  found  in  its  charter,  which  is  the 
legislative  act  creating  it,  and  is  the  commission  of  the  corporation 
to  do  business.  And  it  is  fair  to  suppose  that  the  only  intention 
of  the  capitalist  in  investing  his  money  in  stock  is  that  his  money  is 
to  be  devoted  to  carrying  out  the  purposes  of  the  incorporation,  and 
nothing  else,  and  that  he  intended  by  such  investment  only  to  get 
what  proportionate  profit  his  money  earned,  and  incur  a  propor- 
tionate share  of  the  total  loss  suffered  in  the  enterprise.  But  for 
anything  outside  of  this,  he  did  not  intend  to  be  bound.  Naturally, 
therefore,  when  any  act  is  not  within  the  scope  of  its  charter,  or  the 
purposes  of  its  incorporation,  the  power  of  agency  of  the  corpora- 
tion ceases.  In  law  phrase  the  act  is  "ultra  vires."  And  because 
the  individual  stockholders,  for  whose  collective  body  the  corpora- 
tion is  but  another  name,  and  whose  agent  the  cor])oration  is,  can- 
not be  presumed  to  have  intended  to  incur  any  liability  not  contem- 
plated by  its  charter,  and  not  necessary  to  carry  on  its  business, 
such  an  act  is  void.  Ilence  the  meaning  of  the  rules  that  a  corpora- 
tion has  power  to  make  such  contracts  as  are  either  expressly  or  im- 
pliedly authorized  by  its  charter  or  act  of  incorporation,  or  are 
necessary  or  not  foreign  to  the  carrying  on  of  its  business,^^  but  that 

»T  Thomas  v.  Railroad  Co.,  101  U.  S.  82;  Perrlne  v.  Canal  Co.,  9  TIow.  184; 
Bank  v.  Godfrey,  23  111.  579;  Western  Cottage  Orpau  Co.  v.  Reddish.  51 
Iowa,  55,  49  N.  W.  1048;  Richardson  v.  Massachusetts  Charitable  .Mei-hauic 
Ass'n,  131  Mass.  174;  Weckler  v.  P'irst  Nat.  Bank,  42  Md.  581;  Booth  v. 
Robinson,  55  Md.  419;  Wayland  University  v.  Boorman,  56  Wis.  657,  14  N. 
W.  819;    State  v.  Rice.  G5  Ala.  83;   Cleveland  &  M.  R.  Co.  v.  Ilimrod  Furnace 


224  DEFENSES.  (Cll,   7 

it  has  no  capacity  to  perform  acts  beyond  these  express  or  implied 
powers.  Therefore  an  executory  contract  ultra  vires  is  void.  It 
can  be  enforced  neither  by  nor  against  the  corporation.** 

The  po\A-er  of  a  corporation  to  make  contracts  necessary  to  carry 
on  its  business  implies  that  it  may  borrow  money,  make  debts  and 
issue  negotiable  paper  for  the  purposes  of  its  business.**  So  that 
the  rule  is  that  wherever  a  corporation  may  contract  a  debt,  it  may 
draw  a  bill  or  give  a  note  in  payment  of  it.*°  It  may  also  borrow 
money  to  pay  the  debt,  and  in  furtherance  of  this  may  execute  a  bill 
or  note  to  secure  the  borrowed  money.'*  Also,  it  has  power  to  take 
a  bill  or  note  for  a  debt  due  to  it  And  what  it  may  receive,  it 
may  transfer.**  And  this  means  that  instruments  may  be  indorsed 
in  full  or  in  blank  by  corporations,  including  also  the  power  to 
enter  into  the  collateral  contract  which  an  indorser  assumes.*' 

Co..  37  Ohio  St.  321;  CURTIS  v.  LEAVITT,  15  N.  T.  64;  Spear  v.  Crawford, 
14  "Wend.  22;  Page  v.  Helneberg.  40  Vt.  81;  Rivanna  Nav.  Co.  v.  Dawsons, 
3  Grat.  19;  Thompson  v.  Waters,  25  Mich.  222;  MOSS  v.  AVEKELL,  10  N.  Y. 
449;  AuU  Sav.  Bank  v.  City  of  Lexington,  74  Mo.  104. 

18  Hitchcock  V.  Galveston,  90  U.  S.  o41;  Bank  of  Michigan  v.  Nlles,  1  Doug. 
401;   Nassau  Bank  v.  Jones,  95  N.  Y.  115. 

i»  Mining  Co.  v.  Anglo-Califomian  Bank,  104  U.  S.  192;  Moss  t.  Harpeth 
Academy,  7  Helsk.  28.");  Rcckwell  t.  Elkhorn  Bank,  13  Wis.  653;  Smith  v. 
Eureka  Flour  Mills.  6  Cal.  1;  Munn  v.  Commission  Co.,  15  Johns.  44;  CURTIS 
V.  LEAVITT.  15  N.  Y.  173;  Booth  r.  Robinson,  55  Md.  419;  Goodrich  v. 
Reynolds.  31  111.  490. 

20  1  Pars.  Notes  &  B.  1&4,  165.  The  rule  In  England  is  not  so  broad. 
Chalm.  Bills  &  N.  art.  67. 

21  Mott  V.  Hicks,  1  Cow.  513;  Safford  v.  Wyckoff.  4  Hill,  442;  Moss  v, 
Oakley,  2  Hill,  265;  Mead  v.  Keeler,  24  Barb.  20;  Partridge  v.  Badger,  25 
Barb.  146;  Hamilton  v.  Newcastle  &  D.  R.  R.,  9  Ind.  359;  Came  v.  Brigham, 
39  Me.  35;   Clarke  v.  School  Dist.,  3  R.  I.  199;   Buckley  v.  Briggs,  30  Mo.  452. 

22  Lucas  V.  Pitney,  27  N.  J.  Law,  221;  Mclntire  v.  Preston,  10  IlL  48; 
HARDY  V.  MERRIWEATHER,  14  Ind.  203. 

28  BANK  OF  GENESEE  v.  PATCHIN  BANK,  13  N.  Y.  309.  The  following 
Is  a  portion  of  the  opinion  of  Denio,  J.,  In  this  case:  "I  entertain  no  doubt  but 
that  a  bank  may  lawfully  Indorse  the  commercial  paper  which  It  holds,  with 
a  view  to  raise  money  upon  It  by  way  of  discount,  or  for  any  other  lawful 
purpose.  In  this  respect  it  has  the  same  right  as  any  other  holder  of  such 
paper.  •  •  •  The  contract  of  indorsement  Is  Incident  to  the  negotiation 
of  mercantile  paper,  and  the  right  to  transfer  such  paper  Includes  the  power 
to  enter  into  the  collateral  contract  which  an  indorser  assumes."    MARVINE 


§§  96-98)  REAL    AND    PERSONAL   DEFENSES.  225 

The  converse  of  these  propositions  is  not  what  might  be  expected. 
The  limit  of  the  rule  apparently  is  that,  provided  the  corporation  is 
not  incapacitated  from  contracting,  a  bill  or  note,  although  ultra 
vires,  is  unenforceable  only  as  between  immediate  parties;  but  a  bill 
or  any  other  negotiable  security,  which  is  not  upon  its  face  illegal 
and  unauthorized,  is  valid  in  the  hands  of  a  purchaser  for  value 
without  notice.  The  reason  for  this  is,  that  one  who  deals  direct- 
ly with  a  corporation,  or  who  takes  its  negotiable  paper,  is  pre- 
sumed to  know  the  extent  of  its  corporate  power.  But  when  the 
paper  is  upon  its  face  in  all  respects  such  as  the  corporation  has 
authority  to  issue,  and  its  only  defect  consists  in  some  extrinsic 
fact,  such  as  the  purpose  or  object  for  which  it  was  issued,  and  a 
bona  fide  holder  for  value  receives  it,  he  may  enforce  it  against  the 
corporation.  He  is  not  bound  to  inquire  into  such  extrinsic  fact. 
He  is  in  no  way  apprised  of  it  from  the  paper  itself.  And  the  bur- 
den should  not  be  cast  upon  him  of  suffering  loss  under  such  circum- 
stances, and  it  is  not.^*  This  rule  applies  both  to  making  or 
accepting  notes  and  bills  and  to  their  indorsement.^"^  And  of  course 
its  necessary  implication  is,  that  if  the  want  of  authority  is  known 
to  the  purchaser,  the  instrument  or  the  indorsement  is  unenforce- 
able against  the  corporation. 

The  general  scope  of  this  work  does  not  admit  of  the  discussion  of 
interesting  questions  concerning  commercial  paper  of  public  cor- 
porations, the  execution  of  bills  and  notes  by  the  agents  of  corpora- 
tions, and  lastly  the  character  of  acts  within  the  power  of  corpora- 
tions. For  these  the  students  must  refer  to  more  extensive  treat- 
ises. 

T.  HYMERS,  12  N.  Y.  223;  Planters'  Bank  v.  Sharp.  6  How.  301.  The  power 
to  Indorse  does  not,  as  a  rule,  extend  to  accommodation  paper.  BANK  OF 
GENESEE  V.  PATCHIN  BANK,  supra;  National  Bank  of  Commerce  v.  At- 
kinson (C.  C.)  55  Fed.  465;   Rand.  Com.  Paper,  §  334. 

2*  Genesee  Bank  v.  Patchln  Bank,  13  N.  Y.  309;  Farmers'  &  Mechanics' 
Bank  v.  Butchers'  &  Drovers'  Bank,  16  N.  Y.  125. 

28  Mechanics'  Banking  Ass'n  v.  New  York  &  S.  W.  L.  Co..  35  N.  Y.  505. 
See,  also,  for  general  doctrine,  Bank  of  New  York  v.  Muskingum  Branch  Bank 
of  Ohio,  29  N.  Y.  619;  Barker  v.  Mechanics'  Fire  Ins.  Co.,  3  Wend.  94;  Olcott 
T.  Tioga  R.  Co.,  27  N.  Y.  546;  Supervisors  v.  Schonck,  5  Wall.  772;  Bird  v. 
Daggett.  97  Mass.  494;  MONUMENT  NAT.  BANK  T.  GLOBE  WORKS,  101 
NEG.BILLS.— 15 


226  '  DEFENSES.  (Ch.  7 

It  remains  nnder  this  head  to  speak  of  the  efifect  of  indorsements 
ultra  vires  upon  the  transfer  of  title.  The  rule  is  that  an  indorse- 
ment is  a  good  transfer  of  the  instrument,  although  for  want  of  ca- 
pacity the  corporation  may  incur  no  liability  as  indorser.^'  The 
reason  is  that,  to  be  an  indorser,  the  corporation  must  be  either  the 
payee  or  an  indorsee  of  the  instrument.  And  being  such  payee  or 
indorsee,  the  parties  liable  on  the  paper  are  estopped  from  plead- 
ing ultra  vires,  because  they  have  made  the  paper  payable  to,  or  else 
have  indorsed  it  to,  the  corporation,  and  have  received  its  funds. 
The  defense  of  ultra  vires  is  for  the  protection  of  the  stockholders 
of  a  corporation,  and  not  for  the  benefit  of  the  other  parties  to  the 
paper.'^  It  is  like  the  defense  of  illegality  of  incorporation,  which 
is  not  meant  as  an  excuse  for  the  nonpayment  of  indebtedness,  but 
as  a  protection  to  those  whose  money  is  invested  in  the  stock  of  the 
enterprise.'^*  Thus,  the  transfer,  though  ultra  vires,  transfers  title, 
because  prior  parties  are  estopped  from  taking  advantage  off  the 
defense.  The  principle  of  estoppel  applies  also  to  the  corporation  to 
the  extent  of  precluding  it  from  repudiating  the  transfer, 

99  PERSONS  -NON  COMPOS  MENTIS.— Total  lack  of 
understanding  in  persons  non  compos  mentis  or  drunken 
is  a  defense  to  the  enforcement  of  a  bill  or  note,  both  as 
between  immediate  parties  and  as  against  a  bona  fide 
holder,  -when  the  party  sought  to  be  charged  "was  an  ad- 
judged incompetent.  It  is  doubtful  "whether  in  itself  it  is 
such  a  defense  to  an  instrument  sought  to  be  enforced  by  a 
holder  if  the  holder  was  one  in  good  faith  for  value,  and 
without  notice.     It  is  in  itself  a  defense  as  between  the 

Mass.  57;  Mitchell  v.  Rome  R.  Co.,  17  Ga.  574;  Hall  v.  Auburn  Turnpike  Co., 
27  Cal.  255. 

«e  Smith  v.  Johnson,  8  HurL  &  N.  222;  Brown  v.  Donnell,  49  Me.  421.  Cf. 
Neg.  Inst.  L.  S  41. 

27  Farmers'  &  Merchants'  Ins.  Co.  v.  Needles,  52  Mo.  17;  Snyder  v.  Stude- 
baker,  19  Ind.  462;  Grlener  v.  Ulerey.  20  Iowa,  266;  Massey  v.  Paola  Bldg. 
&  Sav.  Ass'n,  22  Kan.  634. 

««  Veeder  v.  Mudgett,  95  N.  Y.  295;  Eaton  v.  Asplnwall,  19  N.  Y.  119; 
Wright  V.  Pipe  Line  Co.,  101  Pa.  St.  204;  Union  Nat.  Bank  v.  Hunt,  7  Mo. 
App.  42;  In  re  Kings  Co.  EL  R.  Co..  105  N.  Y.  97,  13  N.  E.  18. 


§  99)  HEAL    AND   PERSONAL    DEFENSES.  227 

immediate  parties,  unless,  perhaps,  the  contract  was  fair 
and  the  other  party  had  no  knowledge  of  the  lunatic's  in- 
competency. 

The  views  of  courts  are  changing  with  reference  to  bills  or  notes, 
apon  which  persons  non  compos  mentis  have  incurred  an  obligation. 
They  are  departing  from  a  position  which  was  sustained  by  con- 
sistent theory,  but  at  the  expense  of  justice  and  common  sense. 
This  theory  was  that  such  executory  contracts  would  not  be  en- 
forced by  courts,  because  persons  non  compos  mentis  had  no  as- 
senting mind,  and  therefore  no  capacity  to  contract,^*  and  also  be- 
cause the  courts  would  protect  such  persons  from  the  results  of 
their  own  incapacity,  whether  designedly  injured  or  even  not  in- 
jured at  all.  And  while  probably  the  majority  of  the  decisions 
and  very  many  of  the  text  writers  do  in  truth  declare  this  to  be 
the  rule,^"  it  is  generally  felt,  whenever  it  is  applied,  that  it  is, 
as  a  working  rule,  impracticable.  The  consensus  of  opinion  in  re- 
gard to  executed  contracts,  at  least,  is  that  the  contract  of  a  luna- 
tic is  voidable  at  his  option,  provided  it  can  be  shown  that  at  the 
time  of  making  the  contract  it  was  unfair,  that  the  parties  can 
be  restored  to  their  former  condition,  and  that  the  lunatic  was 
absolutely  incapable  of  understanding  what  he  was  doing,  and  the 
other  party  knew   of  his   condition.'^     But   with   executory   con- 

20  SENTANCB  v.  POOLE,  3  Car.  &  P.  1.  In  this  case  Lord  Tenterden,  0. 
J.,  delivered  the  following  charge:  **The  question  In  this  case  is  whether  the 
defendant  John  Poole,  at  the  time  he  put  his  name  to  this  note,  which  is 
drawn  in  an  unusual  form,  it  being  'to  your  order,'  and  not  addressed  to  any 
one,  was  or  was  not  conscious  of  what  he  was  doing,  for.  If  he  was,  there  must 
be  a  verdict  for  the  plaintiff;  but  should  you  be  satisfied  that  he  was  not 
conscious  of  what  he  was  doing,  and  that  he  was  Imposed  upon  by  reason  of 
his  Imbecility  of  mind,  you  ought  to  find  for  the  defendant."  SEAVER  v. 
PHELPS,  11  Pick.  (Mass.)  304;  Daniel,  Neg.  Inst.  210;  Edvv.  Neg.  Inst.  §  24; 
In  re  Desilver's  Estate,  5  Rawle,  111;  Van  Deusen  v.  Sweet,  51  N.  Y.  378; 
Dexter  v.  Hall,  15  WaU.  9.  See,  also,  Brigham  v.  Fayerweather,  144  Mass.  62, 
10  N.  E.  735;  Hovey  v.  Hobson,  53  Me.  451;  EDWARDS  v.  DAVENPORT 
(C.  C.)  20  I-'ed.  750. 

«o  MOORE  V.  HERSHEY,  90  Pa.  St  196;  VAN  PATTEN  V.  DEALS,  46 
Iowa.  63. 

•  X  MOLTON  v.  CAMROUX,  4  Exch.  17;  Elliot  V.  Ince,  7  De  Gex.  M.  &  G. 
478;    BROWN  v.  JODRELL,  3  Car.  &  P.  30;    Beals  y.  See,   10  Pa.  St  56; 


228  DEFENSES.  (Ch.  7 

tracts,  and  among  tliem  negotiable  instruments,  the  law  has  not 
gone  so  far.  There  is  still  great  weight  of  authority  holding  that  a 
lunatic's  contract  is  voidable,  at  his  option,  whether  fair  or  un- 
fair, or  whether  the  other  party  is  ignorant  of  or  acquainted  with 
his  mental  condition;**  and  it  must  be  said  that  any  other  doc- 
trine than  this  is  not  yet  established.  But  more  advanced  views, 
based  on  business  needs  and  the  practical  administration  of  law, 
are  changing  or  perhaps  developing  this  rule  into  rules  which  may 
be  formulated  as  follows: 

(1)  After  inquisition  duly  found,  Ihe  courts  will  refuse  to  enforce 
the  bill  or  note  of  an  adjudged  lunatic,  or  an  indorsement  by  him 
against  him  directly,  even  in  favor  of  a  bona  fide  holder,  but  will 
direct  his  committee  to  pay  the  amount  thereof,  if  it  is  a  just  claim. 
This  rule  applies  to  the  bills,  notes  and  indorsements  of  adjudged 
habitual  drunkards. 

(2)  If  no  inquisition  has  been  found,  but  the  incompetency  is 
known  to  the  other  party,  then  as  between  the  parties  the  note 
Is  void. 

(3)  If  no  inquisition  has  been  found,  and  if  the  incompetency 
Is  unknown  to  the  other  party,  and  the  transaction  is  fair,  and  the 
parties  cannot  be  replaced  in  statu  quo,  a  recovery  may  be  had  upon 
the  bill,  note  or  indorsement  against  the  incompetent. 

An  inquisition  in  lunacy  is  a  judgment  of  the  law  which  gives  over 
the  person  and  estate  of  the  lunatic  to  the  custody  of  court,  and 
takes  from  him  all  competency  to  contract  until  his  rights  are  re- 
stored by  the  court  itself.  By  virtue  of  it,  contracts  of  lunatics,  made 
after  inquisition  found,  create  no  binding  legal  tie,  because  it  rests 
with  the  court  in  whose  hands  their  property  is  to  allow  or  disal- 
low their  enforcement."     The  redress  for  claimants  in  obtaining 

Behrens  v.  McKenzIe,  23  Iowa,  333;  SHOULTERS  v.  ALLEN,  51  Mich.  530, 
16  N.  W.  888;  Matthiessen  v.  McMahon,  38  N.  J.  Law,  536;  Imperial  Loan  Co. 
V.  Stone  [1892]  1  Q.  B.  599. 

8*  SENTANCE  v.  POOLE,  3  Car.  &  P.  1;  SEAVER  v.  PHELPS.  11  Pick. 
(Mass.)  304;  Hovey  v.  Hobson,  53  Me.  451;  Rogers  v.  Blackwell,  49  Mich.  192, 
13  N.  W.  512;  VAN  PATTEN  v.  BEALS,  46  Iowa,  63;  Daniel,  Neg.  Inst.  § 
210;  Tied.  Com.  Paper,  53. 

8«  Fitzhugh  v.  Wilcox,  12  Barb.  236;  Crippen  v.  Culver,  13  Barb.  424;  Clariie 
T.  Dunham.  4  Denio.  262;  In  re  McLaughlin.  Clarke.  Ch.  113.  It  must  be 
borne  in  mind  that  the  contractual  capacity  of  a  lunatic  under  guai'dianship. 


§  99)  REAL    AND    PERSONAL    DEFENSES.  229 

payment  of  claims,  is  to  present  them  to  the  officer  of  the  court  com- 
missioned to  conduct  the  affairs  of  the  lunatic,  who  is  usually  called 
the  "committee,"  of  his  person  and  estate.  This  committee  upon 
their  presentment  investigates  the  transaction,  and  ascertains  its 
justice.  If  the  committee  refuses  payment,  the  claimant  must  then 
go  into  court,  and  ask  permission  to  prosecute  his  claim  by  suit 
If  the  court  is  satisfied  of  the  justice  of  the  debt,  it  will  order  it  paid 
out  of  the  funds  in  the  hands  of  its  committee;  if  doubtful,  it  will 
appoint  a  referee  or  master  in  chancery  to  ascertain  its  justice,  or 
else  direct  it  to  be  tested  by  a  suit  to  be  brought.^*  The  law,  to  pro- 
tect its  own  machinery,  declares  that  an  inquisition  found  is  like  a 
proceeding  in  rem,  conclusive  on  all  the  world,  and  all  are  bound 
to  take  notice  of  it.  Actual  notice  is  not  necessary,  and,  whether 
given  or  not,  is  ImmateriaL  The  inquisition  is  conclusive  against 
subsequeat  acts  and  dealings,  and  presumptive  against  prior  ones. 
And  this  is  the  rule  irrespective  of  notice.'"  It  must  be  noted  that 
in  England  the  inquisition  is  only  presumptive  evidence  of  lunacy,' ' 
and  that  in  some  states  it  is  conclusive  only  as  to  parties,  and  others 
may  rebut  it  by  clear  e^idence.'^  It  is  not  meant  to  say,  however, 
that  the  lunatic  by  inquisition  is  relieved  from  debts  or  liabiliilca 
incurred  either  before  or  after  the  inquisition.  All  that  is  meant 
is  that  he  can  no  longer  buy  or  sell  or  enter  into  any  contract  or 
dealing  binding  him  or  his  estata  The  court  administers  his  estate 
for  the  protection  of  creditors,  and  will  apply  it  to  the  payment  of 
his  debts  and  the  satisfaction  of  all  obligations  and  charges  which 
legally  ought  to  be  satisfied  out  of  his  property. 

This  rule  and  the  reasons  for  it  apply  to  the  bills,  notes  and  in- 
dorsements of  thos^  adjudged  to  be  habitual  drunkards.     If  a  per- 

as  well  as  the  procedure  for  enforcement  of  claims,  depends  upon  statute, 
and  differs  in  different  states.     Bish.  Cent.  §  977;   Clark,  Cont.  268. 

84  Williams  v.  Cameron,  26  Barb.  172;  In  re  Hopper,  5  Paige,  4S9,  491; 
L'Amoureaux  t.  Crosby,  2  Paige,  428;    In  re  Wing,  2  Hun,  671. 

80  Hughes  V.  Jones,  116  N.  Y.  67,  22  N.  E.  446;  Banker  v.  Banker,  63  N.  T. 
409;  Van  Deusen  v.  Sweet,  51  N.  Y.  .378;  Ripley  v.  Grant,  4  Ired.  Eq.  (N.  C.) 
443;  McGinuis  v.  Com.,  74  Pa.  St.  24.j;  Lancaster  Co.  Bank  v.  Moore.  78  Pa. 
St  407. 

8«  Sergef?on  v.  Sealey.  2  Atk.  412;    Fnnlder  v.  Silk.  .3  Cnmp.  126. 

«T  Den  V.  Clark.  10  N.  J.  I^aw,  217;  Rogers  v.  Wnlkor,  6  Pn.  St  371; 
MOORE  V.  UEJtSUEY,  90  Pa.  St.  196;    Carter  v.  Beckwilh,  128  N.  Y.  312,  29 


230  DEFENSES.  (Ch.  7 

son  Is  adjndfred  incompetent  to  manage  his  own  affairs  by  reason  of 
drunkenness,  such  ]>erson  is  not  liable  upon  his  bill,  note  or  indorse- 
ment even  when  the  instrument  is  in  the  hands  of  a  bona  fide  holder. 
The  holder  and  purchaser  is  bound  to  take  notice  of  the  public  judi- 
cial act  of  taking  a  man's  property  out  of  his  hands,  and  putting 
it  into  that  of  a  committee.*  The  creditor  must  have  his  recourse 
against  the  committee,  and  not  against  the  drunkard.  And  if  the 
remedy  is  thus  taken,  and  the  court  is  satisfied  upon  the  whole  that 
the  claim  is  just,  it  will  allow  it  to  be  paid." 

If  no  inquisition  has  been  found,  the  validity  of  the  bill,  note  or 
indorsement  depends,  first,  upon  the  degree  of  understanding  pos- 
sessed by  the  party  souirht  to  be  charged.  A  man  of  weak  mind, 
if  not  a  lunatic  or  a  fool,  can  contract*"  An  epileptic  or  enfeebled 
mind  has  been  held  competent  to  convey  property.*"  A  person 
bom  deaf  and  dumb  is  not  necessarily  an  idiot.*^  And  no  mere 
want  of  business  capacity,*'  nor  even  monomania,*'  will,  in  the  ab- 
sence of  fraud,  prevent  a  party  from  being  bound  upon  a  bill,  note, 
or  indorsement.  The  mental  incompetency,  to  avoid  such  a  contract^ 
must  amount  to  inability  to  understand  the  nature  of  the  contract, 
and  to  appreciate  its  probable  consequences;**  and  this  only,  upon 
being  established,  will  be  allowed  as  a  defense.  But,  once  estab- 
lished, the  question  of  the  binding  liability  of  this  contract  depends 

N.  E.  5.S2;  People  v.  Tax  Com'rs,  100  N.  Y.  215,  3  N,  E.  85;  Southern  Masonic 
Relief  Tier  Ass'n  v.  Laudenbach  (Sup.)  5  N.  Y.  Supp.  901. 

•  The  contractual  capacity  of  a  habitual  drunkard  under  gfuardlanship  de- 
pends upon  the  statute.     Supra,  note  33. 

«8  Wadsworth  v.  Sharpsteen,  8  N.  Y.  388;  L'Amoureaux  ▼.  Crosby,  2  Paige, 
427. 

«•  Odell  V.  Buck,  21  Wend.  142. 

<o  Spragrue  v.  Duel,  Clarke,  Ch.  90,  affirmed  11  Paige,  480. 

41  P.rnwer  v.  Fisher,  4  .Johns.  Ch.  441. 

*»  Famum  v.  Brooks,  9  Pick.  212;  Osmond  r.  Fitzroy,  8  P.  Wms.  129; 
STEWART  V.  LISPENARD,  26  Wend.  (N.  Y.)  255;  Lawrence  v.  Willis,  75  N. 
C.  471;   Lewis  v.  Pead,  1  Ves.  Jr.  19. 

43  Burgess  v.  Pollock.  53  Iowa,  273,  5  N.  W.  179;  WEST  v.  RUSSELL,  48 
Mich.  74,  11  N.  W.  812;   Boyce  v.  Smith,  9  Grat.  704. 

**  Titcomb  V.  Vantyle,  84  111.  371;  Wall  v.  Hill,  1  B.  Mon,  290;  Hovey  v. 
Chase,  52  Me.  305;  Davren  v.  White,  42  N.  J.  Eq.  569,  7  Atl.  682;  Young  v. 
Stevens,  48  N.  H.  133;  Farnam  v.  Brooks,  9  Pick.  212;  Jackson  v.  King,  4 
Cow.  207. 


§  99)  REAL    AND    PERSONAL   DEFENSES.  231 

upon  the  fact  whether  the  party  dealing  with  him  knew  or  did  not 
know  that  he  was  dealing  with  a  lunatic.  In  the  absence  of  any- 
thing being  shown  upon  the  subject,  the  courts  lean  to  the  presump- 
tion that  the  party  had  this  knowledge.*'  And  if  he  possessed 
such  knowledge,  then  the  bill,  note  or  indorsement  as  between  the 
parties  is  void,  and  will  not  be  enforced.*'  But  if  he  did  not  pos- 
sess such  knowledge,  then  the  position  of  the  parties  has  not  as 
yet  been  fully  developed  and  settled  by  the  courts;  but  so  far  as 
it  has,  it  depends,  in  the  first  place,  upon  whether  the  contract 
is  fair.  The  courts  have  not  defined  what  is  meant  by  this,  and 
its  meaning  naturally  would  be  determined  largely  by  the  circum- 
stances of  each  caset  But  in  the  absence  of  any  expression  on  the 
subject,  it  is  reasonable  to  suppose  that  a  fair  contract  would  mean 
such  as  business  men  of  ordinary  prudence  would  make,  taking  into 
consideration  the  circumstances  of  each  case,  and  that  the  pres- 
ence or  absence  of  any  intent  to  defraud,  overreach  or  cheat  would 
be  an  important  element  in  determining  the  point.  The  next  con- 
sideration in  the  relations  of  the  parties,  is  whether  upon  repudia- 
tion of  the  contract  by  the  lunatic  the  other  party  can  be  replaced 
in  statu  quo.  This  is  because  the  right  of  cancellation,  being  an 
equitable  one,  must  be  governed  by  equity  precedents,  and  among 
equity  precedents  one  of  the  most  important  is  that  "he  who  seeks 
equity  must  do  equity."  The  lunatic  cannot  keep  the  benefits  of  a 
contract,  and  at  the  same  time  rescind  it.  And  these  two  consid- 
erations lead  up  to  the  rule,  which  is  without  doubt  the  most  prac- 
tical yet  determined  upon,  that  bills,  notes  or  indorsements  entered 
into  by  an  insane  pei*son  are  valid  where  the  other  party  acted  in 
good  faith,  without  fraud  or  unfairness,  and  without  knowledge  of 
the  insanity  or  notice  or  information  calling  for  inquiry.*^     Wheth- 

46  Riggs  V.  American  Tract  Soc,  84  N.  Y.  330,  reargued  95  N.  Y.  503. 

4  8  Westerfleld  v.  Jackson,  3  N,  Y.  St  Rep.  354;  Rice  v.  Feet,  15  Johns.  503; 
Johnson  r.  Stone,  35  Hun,  380;  Hannahs  v.  Sheldon,  20  Mich.  278;  McClaIn 
T.  Davis,  77  Ind.  419;  Lincoln  r.  Buckmaster,  32  Vt  652;  Burke  v.  Allen,  29 
N.  H.   lOG. 

*^  MUTUAL  LIFE  INS.  CO.  v.  HUNT,  79  N.  Y.  541;  Browne  v.  Joddrell,  1 
Moody  &  M.  105;  In  re  Beckwith,  3  Hun,  443;  Hirsch  v.  Trainer,  3  Abb.  N. 
C.  274,  and  note;  Dane  v.  Kirkwall,  8  Car.  &  P.  679;  MOLTON  v.  CAMROUX, 
2  Exch.  487,  affirmed  4  Exch.  17;  Elliot  v.  Ince.  7  De  Gex,  M.  &  G.  475;  Young 
T.  Stevens,  48  N.  H.  133;  Beals  T.  See,  10  I'a.  St.  56;  Behrens  v.  McKeuzie,  23 
Iowa.  343. 


232  DEFENSES.  (Cli.  7 

er  the  other  party  has  the  full  rij^hts  of  a  bona  fide  holder  or  not, 
and  whether  all  presumptions  are  in  his  favor  or  not,  is  not  clear. 
Declarations  of  courts  within  recent  years  imply  that  the  presump- 
tions are  not  in  his  favor,  and  that,  lunacy  being  shown,  the  bur- 
den is  upon  the  holder  to  show  ignorance,  fairness  and  irreparable 
loss.**  But  it  is  to  be  suspected  that  the  courts  in  making  these 
decisions  were  influenced  more  by  the  ancient  doctrines  than  the 
modem  tendencies  of  law.  These  modern  tendencies,  followed  to 
their  logical  conclusion,  would  seem  to  require  that  it  be  shown 
afllrmatively  against  the  holder  that  in  his  dealing  with  the  negoti- 
able instrument  he  had  violated  some  of  the  equities  we  have  men- 
tioned; and  that  the  defendant  should  be  called  upon,  not  only  to 
show  the  lunacy,  but  also  the  plaintiff's  knowledge  or  suspicion  of 
it,  as  well  as  the  unfairness  of  the  transaction.  Such,  however,  at 
present,  does  not  seem  to  be  the  rule. 

The  courts  have  arrived  at  rules  regulating  contracts  of  intx^xicated 
persons  by  very  similar  steps.  These  rules  depend  upon  the  question 
whether  the  drunkard  was  adjudged  incompetent  to  manage  his 
affairs  or  not,  and,  if  not,  then  the  question  arose  in  what  stage  of 
drunkenness  the  contract  was  made.  They  have  classified  the  rules 
in  cases  where  no  committee  has  been  appointed  as  follows: 

(1)  When  a  maker,  acceptor  or  indorser  is  so  intoxicated  that  he  is 
entirely  bereft  of  his  senses,  the  weight  of  authority  is  that  no  recov- 
ery against  him  can  be  had  by  the  bona  fide  holder;  and,  if  no  recov- 
ery can  be  had,  then  he  may  recover  upon  the  original  consideration. 

(2)  That  when  a  maker,  acceptor  or  indorser  is  slightly  under  the 
influence  of  liquor,  a  recovery  can  be  had.  Such  a  state  can  be  used 
only  to  show  fraud. 

In  cases  of  bills  and  notes  made  in  a  state  of  complete  intoxication 
by  persons  not  adjudged  habitual  drunkards,  there  is  a  difference 
of  opinion  in  different  jurisdictions.  The  majority  of  decisions  of 
the  courts  and  also  the  majority  of  the  text  writers  declare  that  total 
dnmkenness  is  a  perfect  defense  to  a  drunkard's  bill  or  note  or  the 
indorsement  thereon.  And  these  authorities  imply  that  it  is  such 
even  when  prosecuted  by  a  purchaser  for  value  without  notice,  be- 
cause, as  they  say,  it  is  voidable.*'     But  there  are  other  opinions  of 

<8  Hicks  V.  Marshall,  8  Hua.  327;   Goodell  v.  Ilarrington,  3  Thomp.  &  C.  345. 

48  GORE  V.  GIBSON,  13  Moes.  &  W.  G23;    Wisglesworth  v.  Steers.  1  Hen. 

&  il.  70;    Jenueis  v,  Howard,  G  Blackf.  240;    Uawkius  v.  Bone,  4  Fost.  &  F. 


§  99)  REAL  AND  PERSONAL  DEFENSES.  233 

courts  which  consider  such  a  bill  or  note  perfectly  good  in  his 
hands."  The  English  courts  are  governed  in  their  rulings  by  the 
somewhat  artificial  differences  growing  out  of  their  former  system 
of  pleading.  In  those  courts  it  is  held,  with  regard  to  contracts 
which  it  is  sought  to  avoid  on  the  ground  of  intoxication,  that  there 
is  a  distinction  between  "express"  and  "implied"  contracts.  When 
a  right  of  action  is  grounded  upon  an  express  contract,  requiring  the 
assent  of  both  parties,  and  one  of  them  is  incapable  of  assenting, 
there  can  be  no  binding  contract.  But  in  many  cases  the  law  does 
not  require  an  actual  agreement  between  the  parties,  but  implies 
a  contract  from  the  circumstances,  and  itself  makes  the  contract 
for  the  parties.  A  tradesman,  for  example,  who  supplies  a  drunken 
man  with  necessaries  may  recover  the  price  of  them,  if  the  party 
keeps  them  when  he  becomes  sober."*  And  so  with  negotiable  in- 
struments, the  defendant  is  still  liable  for  the  consideration  of  the 
instrument  or  of  the  indorsement,  though  he  is  not  upon  the  instru- 
ment itself.  UpOii  the  other  side  of  the  question,  it  is  urged  in  be- 
half of  the  bona  fide  holder  that  the  equities  are  in  favor  of  the  bona 
fide  holder.  Drunkenness  ought  not  to  be  regarded,  because  it  is 
the  man's  own  fault"'  It  is  not  to  be  placed  on  the  footing  of  in- 
sanity, because  it  is  temporary.  The  law  protects,  and  ought  to 
protect,  the  helpless  infant  and  the  God-stricken  insane,  but  should 
not  the  vicioua  or  foolish  drunkard.  And  of  two  aggrieved  parties 
— the  drunkard  and  the  bona  fide  holder — it  would  seem  clearly  that 
the  equities  of  the  latter  should  prevail."  When  the  intoxicated 
person  is  not  bereft  of  his  senses,  there  can  be  no  doubt  about  the 
position.  If  the  party  were  only  in  that  state  of  pleasant  exhilara- 
tion common  in  such  cases,  and  was  clear  in  his  mind  upon  what  he 
was  doing,  then  intoxication  is  no  defense.  It  may  only  be  used 
as  a  means  of  showing  fraud,  for  intoxication  may  have  been  used 
as  a  means  of  imposing  upon  the  party  to  the  instrument     But  here 

311;  Byles,  Bills,  64;  Tied.  Com.  Paper,  §  57;  Daniel,  Neg.  Inst  §  214.  But 
see  WILSON  v.  NISBET.  Mor.  Diet.  1509. 

80  Johnson  v.  Medlicott,  3  P.  Wms,  130,  note;  STATE  BANK  v.  McCOY,  69 
Pa.  St.  204;   Neeley  v.  MeSparran,  91  Pa.  St.  17. 

61  Pollock,  C.  B..  in  GORE  v.  GIBSON,  13  Mees.  &  W.  623. 

82  WILSON  v.  NISBET,  2  Mor.  Diet.  1509. 

B»  Berkley  y.  Cannon,  4  Rich.  Law,  136;  Northam  v.  Latouche,  4  Car.  &  P. 
145.    And  see  Smith  v.  WlUlamson,  Johns.  CaB.  Bills  &  N.  193. 


234-  DEFENSES.  (.Ch.  7 

the  fraud,  and  not  the  intoxication,  is  the  basis  of  defense."*  The 
party  had  capacity  to  incur  an  obligation,  and  the  courts  will  en- 
force the  obligation  he  has  incurred.  That  his  senses  were  clouded 
would  be  no  excuse.  The  court  could  no  more  take  that  into  con- 
sideration than  it  could  that  one  partj  was  sharper  than  another  in 
making  a  bargain."" 

100.  STATUTES. — Statutes  which  avoid  instruments  are 
of  the  following  varieties: 

(a)  Those  which  in  w^ords  declare  the  contract  void. 

(b)  Those  w^hich  annex  a  penalty  to  the  consideration 

or  performance  of  the  act  for  which  the  bill,  note, 
or  indorsement  is  given. 

This  section  is  properly  but  a  part  of  the  latter  one  of  this  chapter 
upon  "Illegality  of  Consideration."  And  both  of  these  sections  are 
but  extracts  of  the  positions  taken  upon  the  subject  of  the  legality 
of  the  object  of  contracts  in  the  elementary  works  upon  that  subject. 
The  scope  of  this  work  does  not  admit  of  a  thorough  discussion  of 
the  statutes  which  render  the  consideration  of  bills,  notes  and  in- 
dorsements illegaL  To  pursue  that  subject  with  any  thoroughness, 
the  student  must  examine  works  on  the  general  subject  of  contracts. 
It  is  oup  purpose  only  to  state  the  leading  principles  concerning  the 
application  of  statutes  avoiding  contracts  to  bills  and  notes,  and  then 
to  discuss  somewhat  more  at  length  the  statutory  doctrine  of  usury, 
which  of  all  the  statutes  avoiding  negotiable  instruments  is  most 
often  before  the  courts. 

Statutes  may  avoid  a  bill  or  note  in  two  ways.  The  first  is  where 
in  words  it  declares  them  to  be  void.***     Such  a  declaration  means 

B*  Say  V.  Barwlck,  1  Ves.  &  B.  195;  Wlllcox  v.  Jackson,  51  Iowa,  208,  1  N. 
W.  513. 

05  .MILLER  V.  FINLEY,  26  Mich.  249;  Caulkins  v.  Fry,  35  Conu.  170; 
Reinicker  v.  Smitti,  2  Har.  &  J.  421;  Reynolds  v.  Deehaums.  24  Tex.  174. 

6  8  An  Instance  of  this  Is  found  in  the  case  of  BOWYER  v.  BAMPTOX,  2 
Strange,  1155,  where  It  was  held  that  the  innocent  indorsee  of  a  gaming  note 
can  maintain  no  action  against  the  drawer.  He  may,  however,  sue  the  in- 
dorser  upon  his  indorsement.  This  case  was  decided  in  accordance  with  St.  9 
Anne,  c.  14,  §  1,  which  says  "that  all  notes,  where  the  whole  or  any  part  of 


§  100)  REAL    AND   PERSONAL    DEFENSES.  235 

that  it  was  the  object  of  the  legislature  entirely  to  prevent  the  cir- 
culation of  a  bill  or  note  as  commercial  paper.  And  this  object  the 
courts  will  enforce  despite  any  equities  that  a  bona  fide  purchaser 
may  have.  The  reason  for  this  is  that  the  public  good,  evidenced » 
by  this  intention  to  prevent  circulation,  overrides  any  private  right. "^^ 
The  student  must  note  carefully  that  this  reasoning  does  not  apply 
when  the  statute  merely  declares  the  consideration  of  a  bill  or  note 
to  be  illegal  An  illegal  consideration  is  one  which  may  be  in  itself 
valid.  Yet  courts  will  not  enforce  it,  because  the  legislature  has  de- 
clared in  its  statute  that  the  people  deem  it  against  the  public  wel- 
fare to  allow  it  to  be  enforced.  Therefore,  in  view  of  the  legislative 
act,  it  is  an  invalid  consideration,  or,  in  other  words,  no  consideration 
at  all.  Hence,  against  a  bill  or  note  in  the  hands  of  a  bona  fide 
holder,  mere  illegality  of  consideration  can  no  more  be  urged  than 
lack  of  consideration  can."**  For,  in  declaring  a  consideration  ille- 
gal merely,  the  legislature  will  not  be  presumed  to  intend  to  prevent 
the  circulation  of  the  bill  or  note,  but  merely  to  forbid  its  enforce- 
ment between  immediate  parties."*" 

The  second  general  class  of  statutes  which  avoid  bills  and  notes 
are  those  which  inflict  penalties.  It  is  thought  by  the  courts  that 
the  intention  of  the  legislature  in  affixing  penalties  is  to  suppress  a 
mode  of  dealing  which  it  regards  as  injurious  to  society  by  attainting 
the  contract,  and  attaching  penal  consequences  to  it  whenever  set 
up  as  a  proof  of  debt"*     Such  at  least  is  the  early  doctrine,  and  it 

the  consideration  Is  money  knowingly  lent  for  gaming,  shall  be  void  to  all 
Intents  and  purposes  whatever."  For  other  cases  in  which  bills  or  notes  are 
void  by  virtue  of  a  statute,  see  Easter  v.  Minard,  26  111.  494;  Taylor  v.  Atchi- 
son. 54  111.  196;  Bayley  v.  Taber,  5  Mass.  286;  Wiggin  ▼.  Bush,  12  Johns. 
(N.  Y.)  306;  First  Nat  Bank  v.  Grindstaff,  45  Ind.  158;  Wyatt  v.  Wallace 
(Ark.)  55  S.  W.  1105.  Under  statute  declaring  contracts  on  gambling  consid- 
eration void,  notes  given  on  sale  of  dice-throwing  machines  held  void  in  hands 
of  innocent  purchaser.     Kuhl  v.  Press  Co.  (Ala.)  26  South.  535. 

6T  Eayley  v.  Taber,  5  Mass.  286;  CITY  OF  AURORA  v.  WEST.  22  Ind.  88; 
Cazet  v.  Field.  9  Gray.  329;  TOWNE  v.  RICE.  122  Mass.  67;  Glenn  v.  Farm- 
ers' Bank.  70  N.  0.  191;    BOWYER  v.  BAMPTON.  2  Strange,  1155. 

88  ROCKWELL  V.  CHARLES.  2  Hill  (N.  Y.)  499;  Hill  v.  Northrup,  4  Thomp. 
&  C.  120;    Grimes  v.  Hillenbrand.  4  Hun.  354. 

»»  VAU.ETT  V.  PARKER.  6  Wend.  615. 

«o  Sliaw.  C.  J..  In  Kendall  v.  Robertson.  12  Cush.  156;  Griffith  v.  Wells,  3 
Denio,  226:   Woods  v.  Armstrong,  54  Ala.  150. 


236  DEFENSES.  (Ch.  7 

would  seem  to  be  tbe  yiew  of  the  courts  at  present  that  a  penalized 
consideration  renders  the  bill  or  note  void,  and  not  merely  illegal. 
And  because  it  is  void,  and  because  its  circulation  is  against  the 
public  welfare,  no  bona  fide  holder  can  enforce  it  But  this  rule  also 
has  its  limitation.  A  penalty  is  only  a  prohibition  when  the  object 
of  the  statute  is  to  protect  the  public.  And  if  it  is  clear  that  this 
is  not  the  object  of  the  penalty,  but  that  it  is  enforced  for  adminisr 
trative  purposes,  then  this  rule  does  not  apply.*^  And  with  these 
very  general  remarks  upon  statutes  avoiding  negotiable  instruments, 
let  us  turn  to  the  statute  of  usury. 

101.  USURY  — In  many  states  usury  is  by  statute 
made  a  real  defense.  Usury  is  taking  or  receiving,  "with 
corrupt  intent,  money,  goods,  or  things  in  action  at  a  rate 
of  interest  upon  the  loan  or  forbearance  of  money,  in  a 
greater  amount  than  is  allowed  by  statute. 

102.  In  many  states  the  holder  of  a  bill  or  note,  even  if 
he  be  a  purchaser  for  value  -without  notice,  cannot  recover 
the  amount  of  the  instrument  from  persons  -who  ■were  par- 
ties to  the  instrument  at  its  inception,  when  the  instrument 
-was  negotiated  in  its  inceptio:a  at  a  rate  greater  than  the 
legal  rate  of  interest. 

103.  Where  an  indorsee  acquires  a  bill  or  note  by  way 
of  discount  at  a  rate  greater  than  the  legal  rate  of  inter- 
est, such  transfer  is  a  sale  by  the  indorser  and  a  pur- 
chase by  the  indorsee,  for  which  the  indorsee  may  recov- 
er the  full  amount  of  the  maker,  acceptor,  or  other  prior 
parties,  but  (in  some  jurisdictions)  only  the  amount  paid 
for  the  bill  of  his  prior  indorser. 

Usury  is  of  that  class  of  e\ils  called  In  law  "malum  prohibitum.'* 
By  this  is  meant  something  that  is  in  itself  not  intrinsically  wrong, 
but  something  which  the  people,  through  their  legislatures,  have  de- 
clared inexpedient  as  a  business  practice,  and  therefore  not  to  be 
allowed.     It  is  a  wrong  which  is  created  by  statute,  and  in  deroga- 

«i  Anson.  ConL  p.  172;  Pol.  Cout.  pp.  233,  254;   Clark,  Cent.  p.  387,  and  cases. 


§§  101-103)  REAL    AND    PERSONAL    DEFENSES.  237 

tion  of  common  law.  And  the  first  thing  to  be  noticed  is,  that  the 
statutes  which  create  it  are  strictly  construed  and  their  operation 
is  confined  in  every  possible  way.  To  constitute  usury  three  ele- 
ments are  necessary:  (1)  More  than  the  lawful  rate  of  interest 
must  have  been  received  or  reserved.  (2)  It  must  be  the  effect  of  a 
corrupt  agreement  (3)  The  subject  of  the  contract  must  be  a  loan. 
And  in  discussing  the  subject  in  the  brief  space  permitted  here,  it 
is  purposed  in  the  first  place  to  outline  very  generally  the  nature  of 
usury,  and  then  to  consider  the  commonest  instances  in  which  it 
arises  in  cases  of  bills  and  notes. 

Intent. 

Usury  is  ths  effect  of  a  corrupt  agreement.  There  must  exist  the 
intention  knowingly  to  commit  usury."-  This  intent  of  the  parties, 
when  the  contract  is  not  upon  its  face  usurious,  is  to  be  gathered 
from  such  circumstances  as  the  situation  and  object  of  the  parties 
at  the  time  of  th«  loan,  the  character  and  use  to  be  made  of  the 
fundj  or  article  transferred,  and  the  time  and  manner  and  place  of 
payir.ent.  Designedly  taking  and  receiving  interest  greater  than 
the  legal  rate,  although  theie  be  no  corrupt  agreement  other  than 
that  which  is  manifested  by  one  party  allowing  and  the  other  re- 
ceiving interest,  is  sufficient  evidence  of  intent.  In  fact,  this  is  gen- 
erally the  way  in  which  the  corrupt  agreement  is  shown. 

Loan  or  Fcrhearance  of  Money. 

It  is  a  well-settled  rule  that  the  loan  must  be  of  money,"  unless 
otherwise  expressly  provided  by  statute.  An  agreement,  for  example, 
whereby  the  parties  loaned  cattle,  upon  the  understanding  that 
during  the  loan  the  lessee  was  to  pay  a  stipulated  sum  for  the  use  of 
the  property,  with  the  further  stipulation  that  the  lease  might  ter- 
minate in  sale,  but,  if  the  sale  was  not  carried  out,  the  cattle  were  to 

•»  Price  V.  Campbell,  2  Call  (Va.)  110;  Condit  v.  Baldwin.  21  N.  Y.  210; 
Nourse  v.  Prime,  7  Johns.  Ch.  77;  Bank  of  U.  S.  v.  Wag^ener,  9  Pet.  399; 
Tyson  v.  Rickard,  3  Har.  &  J.  109;  Bearce  v.  Barstow,  9  Mass.  45;  Scott  v. 
Lloyd,  9  Pet.  418;  Duncan  v.  Maryland  !<av.  Tnst..  10  Gill    &  J.  299. 

8  8  Dry  Dock  Bank  v.  American  Life  Insurance  &  Trust  Co.,  3  N.  Y.  344; 
Bull  V.  Rice,  5  N.  Y.  315;  Perrine  v.  Hotchkiss,  2  Lans.  41G;  Dunham  v.  Dey, 
18  Johns.  40;  Suydam  v.  Westfall,  4  Hill,  211;  Ketchura  v.  Barber,  Id.  2'J.^): 
Tardeveau  v.  Smith's  Ex'rs,  Hardin  (Ky.)  185;  Foote  v.  EmerBou,  10  Vt  S3i8; 
Spencer  t.  Tllden,  5  Cow.  144. 


238  DEFENSES.  (Ch.  7 

be  returned,  was  held  not  a  usurious  one.  The  case  turned  upon  the 
principle  that,  where  the  agreement  was  for  the  loan  of  chattels,  it 
was  immaterial  whether  the  compensation  fixed  by  the  agreement 
exceeded  the  statutory  rate,  because  the  subject  of  the  loan,  since  it 
was  not  money,  was  not  within  the  statute  of  usury.  An  agreement 
where  sheep  were  loaned,  and,  by  the  contract,  the  same  number 
were  to  be  returned,  of  the  same  age  and  quality,  with  interest  of  15 
to  25  per  cent,  upon  their  cash  value,'*  and  another  agreement 
where  a  heifer  was  loaned  at  an  interest  of  25  per  cent.,  to  be  re- 
turned in  kind,'"  were  considered  not  usurious.  These  differ  from 
money,  in  that  money  is  supposed  to  have  a  fixed  value.  Chattels 
vary  according  as  the  market  rises  or  falls.  Therefore  a  loan  of 
animals  to  be  returned  in  animals  is  not  usury,  usury  being  con- 
fined to  money  only.  The  courts  construe  this  out  of  tlie  term 
usually  employed  in  the  statutes,  "the  rate  of  interest."  They  take 
the  ground  that  interest  and  forbearance  cannot  be  predicated  of 
any  other  than  a  loan  of  money,  actual  or  presumed,  because  money 
has  the  same  value  when  the  loan  is  made  and  when  returned; 
whereas  chattels,  measured  by  the  standard  of  money,  so  fluctuate 
that  taking  the  chattels  borrowed  and  returned  with  the  compensa- 
tion for  the  use  of  the  same  at  the  time  of  returning  the  borrowed 
property  may  or  may  not  aggregate  in  money  value  the  value  of  the 
property  loaned  in  the  first  instance.  In  the  case  of  negotiable  in- 
struments, where  an  accommodation  party  makes,  accepts,  or  in- 
dorses an  instrument,  and  receives  a  commission  for  so  doing,  de- 
ducted from  the  avails  of  the  note  itself,  there  is  no  usury."  The 
statute  forbids  an  illegal  rate  of  interest  upon  the  loan  or  forbear- 
ance of  money.  This  is  a  loan  of  credit,  and  not  of  money,  credit 
being  a  distinct  property  from  money.  So  lenders  may,  in  addition 
to  lawful  interest  on  the  discount  of  bills  and  notes,  take  a  reason- 
able commission  by  way  of  compensation  for  trouble  and  expense, 
provided  such  commission  be  not  intended  as  a  device  to  cover  a 
usurious  loan.'^     In  all  of  these  things,  the  moneys  paid  or  deduct- 

8*  Hall  V.  Haggart,  17  Wend.  280. 
«B  Ciimmings  v.  Williams,  4  Wend.  680. 

e«  Van  Duzer  v.  Howe,  21  N.  Y.  531;  Kitchel  v.  Schenck,  29  N.  T.  515. 
«T  Thurston  v.  Cornell,  38  N.  Y.  281;    Morton  v.  Thurber,  85  N.  Y.  551; 
Eaton  v.  Alger,  2  Abb.  Dec.  5;   Trotter  v.  Curtis,  14  Johns.  IGO;    Dayton  v. 


§§  101-103)  REAL   AND    PERSONAL    DEFENSES.  2b9 

ed  were  for  some  other  reason  than  the  mere  loan  of  money  itself 
Something  was  done  in  addition  to  handing  over  the  money,  and 
that  something  was  paid  for.  Such  payment  was  not  interest,  but 
rent  or  compensation.'" 

Interest  in  Advance — Compound  Interest. 

Another  thing  to  mention  is  the  conamon  practice  by  which  interest 
ifl  taken  in  advance  upon  the  face  value  of  the  paper.  The  lender  here 
has  the  use  of  his  own  discount,  and  this,  in  case  of  discount  of  paper 
in  large  amounts,  aggregates  sometimes  very  large  sums  of  money. 
This  is,  in  fact,  usurious,  but,  time  out  of  mind,  it  has  been  the  cus- 
tom, and  is  allowed  for  the  benefit  of  trade.®*  It  is  confined  in  its 
operation  to  negotiable  instruments,  because  of  their  importance  in 
commercial  affairs,  and  because  it  is  the  established  custom  of  banks, 
which  play  so  important  a  part  in  discounting  them  that  on  all 
hands  it  is  deemed  necessary  for  the  circulation  of  the  instrument 
in  the  course  of  trade.  Again,  compound  interest  is  not  usury.^° 
There  is  this  distinction,  however:  An  agreement  for  compounding 
future  interest  is  illegal,  not  because  such  agreements  are  obnoxious 
to  the  usury  laws,  but  because  they  may  serve  as  a  temptation  to 
negligence  on  the  part  of  the  creditor  and  a  snare  to  the  debtor,  and 

Moore,  30  N.  J.  Eq.  543;  Atlanta  Mining  &  Rolling  Mill  Co.  v.  Gwyer,  48  Ga. 
11;  Cockle  v.  Flack,  93  U.  S.  344;  De  Forest  v.  Strong,  8  Conn.  513.  In  KENT 
V.  WALTON,  7  Wend.  (N.  Y.)  256,  it  was  held  by  Savage,  C.  J.,  that,  "to 
make  out  the  defense  of  usury,  it  was  necessary  to  show  that  the  note  was  not 
a  valid  instrument  when  discounted.  •  *  *  It  is  well  settled  that  dis- 
counting a  business  note  at  more  than  seven  per  cent,  interest  is  not  usury." 
"The  principle  is  too  well  settled  to  be  questioned  that  a  bill  free  from  usury 
In  Its  concoction  may  be  sold  at  a  discount;  because,  as  It  was  free  from 
usury  between  the  original  parties  to  it,  no  subsequent  transaction  can.  as 
It  respects  those  parties.  Invalidate  it."  Sutherland,  .7.,  in  CKAM  v.  HEN- 
DRICKS, Id.  509,  572.  And  see  WIFFP:n  v.  ROBERTS,  1  Esp.  201.  But  see 
Cloflin  V.  Boorum,  Johns.  Cas.  Bills  &  N.  16& 

«8  Ketchum  v.  Barber,  4  Hill  (N.  Y.)  225. 

«»  New  York  Firemen  Ins.  Co.  v.  Sturges,  2  Cow.  (N.  Y.)  6G4;  Bank  of  Alex- 
andria V.  Mandeville,  1  Cranch,  C.  C.  552,  Fed.  Cas.  No.  850;  Warren  Deposit 
Bank  v.  Robinson  (Ky.)  35  S.  W.  275. 

TO  Stewart  v.  Petree,  55  N.  Y.  021;  Guernsey  v.  Rexford,  63  N.  Y.  G31; 
Culver  V.  Bigelow,  Johns.  Cas.  Bills  &  N.  171;  Miner  v.  Paris  Exch.  Bank, 
53  Tex.  559;  Uamilton  v.  Le  Grange,  2  II.  BL  144;  Fubeii  T.  CauiliclU,  a  Ohio, 
17. 


240  DEFENSES.  (Ch.   7 

prove  In  the  end  oppressive  and  ruinous.''*  But  where  the  interest 
has  already  accrued,  then  the  parties  may  lawfully  agree  to  turn 
such  interest  into  principal,  and  to  carry  the  interest,  and  the  for- 
bearance will  constitute  a  consideration.  As  a  matter  of  fact,  there 
is  no  new  loan,  and  the  interest  is  in  excess  of  the  legal  rate.  But 
the  law  implies  a  loan,  and,  an  agreement  being  made,  it  declares 
the  contract  free  from  the  taint  of  usury. 

Effect  of  Usury. 

But,  usury  being  once  present,  the  next  question  is,  how  far  does 
the  statute  operate  in  avoidance  of  contracts  where  it  in  words 
declares  the  contract  void  or  penalizes  the  transaction.  The  gen- 
eral rule  in  such  cases  is  that,  as  between  immediate  parties  in 
respect  to  all  persons  seeking  enforcement  of  the  contract,  it  is 
void.  Usury  being  a  purely  statutory  defense,  the  statutes  must 
be  examined  in  each  instance  to  know  just  the  extent  of  its  effect. 
The  taint  of  usury  in  the  original  contract  is  carried  forward  and 
enters  into  all  subsequent  contracts  taken  in  renewal  of  it.  And 
if  it  appears  that  a  contract  in  the  first  instance  is  void,  and  is 
sought  to  be  renewed  by  changing  its  form,  so  that  the  contract  still 
stands  upon  the  original  loan,  then  the  loan  given  in  renewal  is  also 
void.''*  This  general  rule  is  also  very  much  confined,  the  excep- 
tions being  probably  more  numerous  than  the  application  of  the 
rule  itself.  A  mortgage,  for  instance,  may  be  void  for  usury,  but  a 
bona  fide  purchaser  of  the  property  under  its  foreclosure  acquires 
good  title.^'  A  party  is  estopped  from  setting  up  usury  where, 
by  his  representations,  he  has  persuaded  an  innocent  party  to  dis- 
count a  negotiable  instrument.  Contracts  voidable  for  usury  may 
be  ratified  and  become  valid  contracts.^*  And  also,  where  a  re- 
newal note  is  void  for  usury,  the  parties  may  sue  upon  the  original 
consideration.^'    And,  lastly,  usury  is  a  defense  which  can  only 

«i  Quackenbush  v.  Leonard,  9  Paige,  334;   Yoiinfr  v.  Hill,  67  N.  Y.  IH'i. 

T2  CampbeU  v.  Sloan,  62  Pa.  St.  481;  Pickett  v.  Merchants'  Nat.  Bank,  32  Ark. 
346. 

7  8  JACKSON  v.  HENRY,  10  Johns.  (N.  Y.)  195;  Elliott  v.  Wood,  53  Barb. 
(N.  Y.)  285. 

T4  Dix  V.  Van  Wyck,  2  Hill  (N.  Y.)  522,  and  cases  cited. 

TB  Farmers'  &  Mechanics'  Bank  v.  Joslyn,  37  N.  Y.  353;  Wlnsted  Bank  v. 
Webb,  39  N.  Y.  325,  476,  and  note;  Knights  v.  Putnam,  3  Pick.  184;  OATES 
V.  BANK,  100  U.  S.  239.     See,  also,  Ohio  &  M,  R.  Co.  v.  Kasson,  37  N.  Y.  218; 


§§   101-103)  REAL    AND    PERSONAL    DEFENSES.  2il 

be  availed  of  by  parties  to  the  contract,  or  those  connected  in  in- 
terest with  them.  A  mere  stranger,  or  one  who  has  no  legal  inter- 
est in  the  question,  may  not  take  advantage  of  the  statute,  because 
the  intent  of  the  statute  was  to  relieve  oppressed  debtors.  They 
alone  may  claim  its  protection,  and  declare  the  contract,  usurious 
in  its  inception,  void.'* 
Same — As  Applied  to  Bills  and  Notes. 

It  only  remains  to  apply  the  theories  of  usury  where  they  avoid 
the  instrument,  to  the  doctrines  of  bills  and  notes.  The  more  com- 
mon situations  to  which  the  rules  of  usury  have  been  applied  are 
these:  (1)  WTiere  an  instrument  is  usurious  in  its  inception; '^  (2) 
where  a  contract  is  valid  in  its  inception,  but  usury  is  alleged  in  a 
subsequent  indorsement  or  transfer  of  it;  (3)  where  one  indorser 
seeks  to  avail  himself  of  it  as  a  defense  where  either  the  note  had  a 
usurious  inception,  or  prior  indorsements  have  been  corrupted  by 
usury. 

Where  a  bill  or  note  is  delivered  to  the  payee  for  consideration, 
the  question  of  usury  in  the  inception  of  the  instrument  depends  of 
course  upon  the  nature  of  the  transaction  between  the  original  par- 
ties. But  in  the  case  of  accommodation  paper  a  different  question 
is  presented.  If  the  accommodated  payee  negotiates  the  instru- 
ment to  one  who  pays  less  than  the  amount  due  upon  it  after  de- 
ducting lawful  interest,  it  has  been  held  by  numerous  cases'*  that 
the  instrument  has  its  inception  when  delivered  to  such  person,  and 
the  transaction  is  deemed  to  be  a  loan,  and  usurious,  although  he 

DE  WOLF  V.  JOHNSON,  10  Wheat.  367;   Ward  v.  Sugg,  113  N.  C.  489,  8  S.  E. 
717.  and  Johns.  Cas.  Bills  &  N.  1G3. 

76  Mason  v.  Lord,  40  N.  Y.  490. 

77  As  to  conflict  of  laws,  see  ante,  p.   185. 

T8  SWEET  V.  CHAPMAN,  7  Hun,  576.  It  was  held  by  Noxon,  J.,  In  this 
ease  that  "the  rule  appears  to  be  settled  that  a  promissory  note,  to  be  the 
subject  of  sale,  must  be  an  existing  valid  note  in  the  hands  of  the  payee,  and 
given  for  some  actual  consideration,  so  that  it  can  be  enforced  against  the 
original  parties,  and,  if  not  valid  in  the  hands  of  the  payee,  cannot  be  rendered 
valid  by  a  sale  to  a  bona  fide  purchaser  at  a  rate  of  interest  exceedinj;  sovcn 
per  cent."  HALL  v.  WILSON,  16  Barb.  (N.  Y.)  548;  Hall  v.  Earnest,  m  Barb. 
(N.  Y.)  588;  Rapelye  v.  Anderson,  4  Hill  (N.  Y.)  483;  Bossange  v.  Ross,  20 
Barb.  576;  Belden  v.  Lamb,  17  Conn.  452;  Holeman  v.  Hobson,  8  Ilumpli.  I'JH: 
Corcoran  v.  Powers,  6  Ohio  St  19;  Bock  v.  Laumau,  24  Pa.  SL  448;  Van 
Schaack  v.  Stafford,  12  Pick.  505. 
NEC. BILLS.— 16 


242  DEFENSES.  (Ch.  7 

was  ignorant  of  the  character  of  the  paper.  The  test  is  held  to  be 
whether  the  person  so  discounting  the  instrument  takes  it  from  one 
who  could  have  maintained  an  action  upon  it  against  the  prior  par- 
ties. It  is  difiScult,  however,  if  not  impossible,  to  reconcile  these 
cases  with  the  rule  that,  aside  from  usury,  accommodation  paper 
has  its  inception,  as  against  a  bona  fide  purchaser,  when  delivered 
to  the  payee,  and  that  as  against  such  a  holder  lack  of  consideration 
between  the  original  parties  is  no  defense.  The  correct  rule  ap- 
pears to  be  that  as  against  one  who  purchases,  even  for  a  sum  which 
in  case  of  a  loan  would  be  usurious,  without  knowledge  that  the 
paper  is  accommodation  paper,  it  must  be  deemed  to  have  had  its 
inception  when  delivered  to  the  payee.''"  The  latter  rule  is  sup- 
ported by  Mr.  Daniel,  who  maintains  that  "in  all  cases,  if  the  holder 
at  the  time  he  received  the  note  did  not  know  the  fact  that  it  was 
not  a  valid  and  subsisting  security,  there  is  no  intention  of  borrow- 
ing and  lending,  which  is  necessary  to  create  usury;  and  the  holder 
may  recover  upon  it  against  the  maker."  *° 

When  the  paper  is  usurious  in  its  inception,  then  it  is  void  as  to 
the  maker,  acceptor,  and  parties  prior  to  the  discount,  and  no  sub- 
sequent transaction  can  make  it  valid. ®^  Void  in  its  inception,  it 
continues  void  forever,  whatever  its  subsequent  history  may  be. 
It  is  as  void  as  to  these  parties  in  the  hands  of  an  innocent  holder 
for  value  as  it  was  in  the  hands  of  those  who  made  the  usurious 
contract.    Ko  vitality  can  be  given  it  by  sale  or  exchange,  because 

7»  Holmes  v.  Bank,  53  Minn.  350,  55  N.  W.  555;  Jackson  v.  Travis,  42  Minn. 
438,  44  N.  W.  316;  Veazie  Bank  v.  Paulk.  40  Me.  109;  May  v.  Campbell,  7 
Humph.  (Tenn.)  450;  Wliitworth  v.  Adams,  5  Rand.  (Va.)  333;  Daniel,  Neg. 
Inst.  §  751;  2  Ames.  Cas.  Bills  &  N.  882. 

80  Daniel,  Neg.  Inst.  §  752. 

81  In  the  case  of  LOWE  v.  WALLER,  2  Doug.  736,  a  bill  was  drawn  by  W., 
who  was  also  payee,  and  by  him  indorsed  to  H.  &  S.,  who  indorsed  to  plaintiff. 
In  an  action  against  the  acceptor  the  defense  was  that  the  bill  was  given  upon 
a  usurious  contract  between  H.  &  S.  and  defendant.  It  was  held  that  the 
defense  was  good,  though  plaintiff  was  a  purchaser  for  value,  without  notice 
of  the  usury.  As  to  the  rule  when  there  is  no  usury  in  the  inception  of  the 
bill,  see  PARR  v.  ELIASON,  1  East,  92,  and  Cardwell  v.  Martin,  9  East,  191. 
Where  a  negotiable  instrument  is  free  from  usury  in  its  inception,  it  may  not 
be  afterwards  tainted  with  usury,  save  as  between  the  immediate  parties 
thereto.    Knights  v.  Putnam,  3  Pick.  (Mass.)  184. 


§§  101-103)  REAL    AND    PERSONAL    DEFENSES.  243 

that  which  the  statute  has  declared  void  cannot  be  made  valid  bj 
passing  through  the  channels  of  trade,** 

Where  the  instrument  is  not  usurious  in  its  inception,  the  ques- 
tion arises  whether  a  transfer  for  an  amount  less  than  the  face  of 
the  instrument,  after  deducting  legal  interest,  is  in  turn  usurious. 
It  is  no  doubt  true  that,  if  a  bill  or  note  be  indorsed  as  collateral 
•security  for  a  usurious  loan,  the  indorsement  is  affected  by  the 
usury.*'  In  such  case  the  indorsement  is  void,  and  no  action  can 
be  maintained  thereon,  even  by  a  bona  fide  purchaser  for  value, 
against  the  indorser;  nor,  it  seems,  can  an  action  be  maintained 
thereunder  against  prior  parties,**  though  there  is  authority  for  the 
position  that  such  a  holder  can  trace  title  under  the  indorsement, 
and  thereby  maintain  an  action  against  prior  parties  who  were  not 
parties  to  the  usury.*'  It  has  even  been  held  by  some  courts  that 
whenever  the  instrument  is  transferred  for  less  than  face  value  de- 
ducting legal  interest  the  transfer  is  usurious;  *'  but  this  view  can- 
not be  maintained  upon  principle,  since  it  confounds  a  transaction 
which  is  really  a  sale  with  a  loan.  It  is  generally  held,  therefore, 
that  the  mere  discount  of  the  instrument  for  more  than  legal  inter- 
est is  not  usurious,  and  that  the  transferee  may  recover  against  all 
parties.*^  Yet,  conceding  the  right  of  the  indorsee  to  recover,  an- 
sa CLAFLIN  V.  BOORUM,  122  N.  Y.  385,  25  N.  E.  300;  POWELL  v.  WA- 
TERS, 8  Cow.  (N.  Y.)  6G9;  Wilkie  v.  Roosevelt,  3  Johns.  Cas.  206;  Bennett 
V.  Smith,  15  Johns.  335-557;  Miller  v.  Hull.  4  Denio,  104,  107;  Miller  v. 
Zeimer,  111  N.  Y.  441-444,  18  N.  B.  716;  LOWE  v.  WAIJ^ER,  2  Doug.  736; 
Atlanta  Sav.  Bank  v.  Spencer,  107  Ga.  629,  33  S.  B.  878;  LOWES  v.  MAZ- 
ZAREDO,  1  Starkie,  385.  In  this  case  it  was  held,  that,  where  the  payee  of 
A  bill  of  exchange  indorses  it  upon  a  usiirious  contract  at  the  time  of  the 
contract,  a  bona  fide  holder  cannot  afterwards  recover  upon  it  against  the  ac- 
ceptor.    CHAPMAN  V.  BLACK,  2  Barn.  &  Aid.  590. 

88  Levy  T.  Gadsby,  3  Cranch,  180.  Whether  a  loan  or  a  sale,  held  to  be  & 
■question  of  fact.     Becker's  Investment  Ag.  v.  Rea,  63  Minn.  450,  65  N.  W.  928. 

•4  LOWES  V.  MAZZAREDO,  1  Starkie,  385;   Nichols  v.  Fearson,  7  Pet.  103. 

86  Knights  V.  Putnam,  3  Pick.  (Mass.)  185;  Armstrong  v.  Gibson,  31  Wis. 
•66.     Mr.  Daniel  supports  this  view.     Daniel,  Neg.  Inst.  §  760. 

88  LOWES  V.  MAZZAREDO,  1  Starkie,  385;  CHAPMAN  v.  BLACK,  2 
Barn.  &  Aid.  588;   Whltworth  v.  Adams.  5  Rand.  (Va.)  419. 

8T  PARR  V.  ELIASON,  1  East,  92;  CRAM  v.  IIEXDRICIvS.  7  Wend.  (X.  Y.) 
569;    Crane  v.  Price,  35  N.  Y.  494;    Corning  t.  Pond,  29  Hun,  129;    Nichols  v. 


244  DEFENSES.  (Ch.  7 

other  question  upon  which  the  authorities  are  in  conflict  has  arisen, 
— whether  he  may  recover  the  face  of  the  instrument,  or  merely  the 
amount  which  he  paid  for  the  indorsement  It  is  generally  admit- 
ted that  from  prior  parties  he  may  recover  the  full  amount  of  the 
bill  or  note,  but  many  cases  limit  the  amount  of  his  recovery  against 
his  indorser  to  the  amount  paid.*'  No  good  reason  for  such  a  dis- 
tinction is  apparent,  and  other  cases  hold,  upon  what  it  seems  is  the 
correct  principle,  that  tlie  indorsee  may  recover  the  face  value  as 
well  from  his  indorser  as  from  prior  parties.**  This  right  of  the 
indorsee  is  not  to  be  confounded  with  the  right  of  the  indorsee,  as 
well  as  of  the  transferee  by  delivery,  to  recover  for  breach  of  the 
implied  warranty  of  validity  of  the  instrument,  for  the  recovery  for 
breach  of  this  warranty  is  limited,  as  we  have  seen,  to  the  amount 
of  the  consideration  paid.'" 

In  conclusion  it  must  be  repeated  that  usury  is  purely  a  statutory 
defense,  and  that  the  statutes  differ  in  different  jurisdictions.  In 
some  states,  for  example,  the  statute  expressly  saves  the  rights  of 
bona  fide  purchasers,  and  hence  in  these  jurisdictions  the  defense  of 
usury  is  not  real,  but  merely  personal.* *^ 

104.  FAILURE  TO  STAMP.— Failure  to  affix  a  revenue 
stamp  to  a  negotiable  instrument  is  sometimes  by  statute 
made  a  real  defense. 

Failure  to  stamp  a  bill  or  note  in  accordance  with  the  require- 
ments of  a  revenue  law  imposing  a  penalty  for  such  failure,  and  de- 

Fearson,  7  Pet.  109;  Newman  v.  Williams,  29  Miss.  222;  French  v.  Grindle, 
15  Me.  163;   Ayer  v.  Tilden,  15  Gray  (Mass.)  178. 

88  Munn  V.  Commission  Co.,  15  Johns.  44;  Ingalls  T.  Lee,  9  Barb.  651; 
CRAM  V.  HENDRICKS,  7  Wend.  (N.  Y.)  569;  Noble  v.  Walker,  32  Ala.  45G; 
Coye  v.  Palmer,  16  Cal.  158;   French  v.  Grindle,  15  Me.  163. 

89  Roark  T.  Turner,  29  Ga.  455;  NATIONAL  BANK  v.  GREEN,  33  Iowa, 
140;  Nichols  v.  Fearson,  7  Pet.  103;  Belden  v.  Lamb,  17  Conn.  441;  Turner 
V.  Brown,  3  Smedes  &  M.  425.  Such  Is  the  rule  under  Neg.  Inst.  L.  §  96, 
which  provides  that  "a  holder  In  due  course  *  •  •  may  enforce  payment 
of  the  instrument  for  the  full  amount  thereof  against  all  parties  liable 
thereon." 

»o  Ante.  p.  — . 

•1  Robinson  v.  Smith,  62  Minn.  62,  64  N.  W.  90;  Rand.  Com.  Paper,  S  525. 


I   104)  REAL    AND    PERSONAL    DEFENSES.  245 

<?laring  that  instruments,  if  not  stamped,  shall  not  be  admissible  in 
•evidence,  has  been  held  in  England  to  be  a  real  defense.®^  Thus, 
where  a  bill  was  declared  on  as  drawn  in  Bombay,  it  was  held  that 
the  acceptor  could  show  that  it  had  been  drawn  in  England,  and 
hence  was  not  receivable  in  evidence  for  want  of  being  stamped  as  an 
inland  bill,  although  the  plaintiff  was  an  innocent  indorsee,  for* 
value,  without  notice.'^  Whether  failure  to  stamp  is  a  real  defense 
depends,  of  course,  upon  the  construction  of  the  particular  stat- 
ute. Under  the  federal  act  of  July  1,  1862,  it  was  held  that  only 
fraudulent  omissions  rendered  the  instrument  inadmissible  in  evi- 
dence,'* and  that  the  defense  that  the  instrument  was  not  stamped 
till  after  it  was  issued  was  not  available  against  a  bona  fide  pur- 
•chaser  who  received  it  after  it  was  stamped.*'  The  provision 
against  the  reception  of  the  instrument  was  in  most  jurisdictions 
held  to  apply  only  to  the  federal,  and  not  to  the  state,  courts,  for 
the  reason  that  for  congress  to  prescribe  rules  regulating  the  ad- 
ministration of  justice  by  the  state  courts  would  be  to  trench  upon 
the  independent  existence  of  the  state  governments."  Similar  rul- 
ings have  been  made  under  the  so  called  "War  Revenue  Act,"  which 
took  effect  July  1,  1898,'^  and  which  foUows  in  its  general  features 
the  earlier  act.  The  present  act  provides  for  revenue  stamps  as  fol- 
io we:  On  bank  checks,  drafts,  and  certificates,  two  cents;  on  inland 
bills  and  promissory  notes,  two  cents  per  ^100;  and  on  foreign  bills, 
four  cents  per  $100,  or,  if  drawn  in  sets,  two  cents  per  |100.  A  dis- 
cussion of  the  various,  and  often  conflicting,  decisions  involving  the 

82  BENNISON  y.  JEWISON,  12  Jur.  485;  Ex  parte  Manners.  1  Rose,  68; 
Bartlett  v.  Smith,  11  Mees.  &  W.  483.    As  to  conflict  of  Laws,  see  ante,  p.  183. 

98  BKXNiSON  V.  JEWISON,  supra. 

•4  Campbell  v.  Wilcox,  10  Wall.  421;  Green  v.  Holway,  101  Mass.  ^43;  Dud- 
ley V.  Wells,  55  Me.  145;  Whjgham  v.  Pickett,  43  Ala.  140;  State  v.  Hill,  30 
Wis.  416;  Cabbott  v.  Radford,  17  Minn.  320  (Gil.  296). 

96  Sperry  v.  Horr,  32  Iowa,  184;  LATHAM  v.  SMITH,  45  111.  25;  Chaffe  v. 
Ludeling,  27  La.  Ann.  607. 

o«  Carpenter  v.  Snelling,  97  Mass.  452;  People  y.  Gates,  43  N.  Y.  40; 
■Griffin  v.  Ranney,  35  Conn.  239;  Bowen  v.  Byrne,  55  111.  467;  Sammons  y. 
Halloway,  21  Mich.  162.  Contra,  City  of  Muscatine  v.  Sterneman,  30  Iowa, 
526;    Chartlers  &  Robinson  Turnpike  Co.  v.  McNamara,  72  Pa.  St.  281. 

»T  Dawson  v.  McCarty  (Wa.sh.)  57  Pac.  816.  See,  also.  People  v.  Fromme, 
35  App.  Dlr.  459,  54  N.  Y.  Supp.  833;  Lorlng  y.  Chase,  'JJH  Miac  Rep.  318,  &S 
M.  Y.  Supp.  312. 


246  DEFENSES.  (Ch.  7 

construction  and  effect  of  the  federal  revenue  laws  is  beyond  the 
scope  of  this  book-** 


105.  ALTERATION.— Where  a  negotiable  instrument  is 
materially  altered  without  the  assent  of  all  parties  lia- 
ble thereon,  it  is  avoided,  except  as  against  a  party  -who 
has  himself  made,  authorized,  or  assented  to  the  altera- 
tion, and  subsequent  indorsers.^ 

The  reason  that  a  material  alteration  of  a  negotiable  instrument 
discharges  a  party  who  has  not  consented  thereto  is  founded  upon 
what  is  or  was  deemed  to  be  public  policy,  the  law  imposing  this 
severe  penalty  as  a  safeguard  against  tampering  with  written  in- 
struments.^""  The  alteration  is,  of  course,  inoperative  as  such,  for 
an  alteration  of  the  instrument,  or,  in  other  words,  the  substitution 
of  a  new  contract,  could  be  effected  only  by  the  consent  of  the  par- 
ties. The  alteration,  however,  by  force  of  a  positive  rule  of  law,  iS' 
operative  to  nullify  the  instrument,  even  as  against  a  bona  fide  pur- 
chaser.^"^ Thus,  if  an  action  were  brought,  based  upon  the  instru- 
ment as  attempted  to  be  altered,  the  defendant  would  have  a  per- 
fect defense  by  simple  denial  of  execution  of  the  instrument  de- 
clared on.  In  an  action  based  upon  the  original  instrument,  on  the 
other  hand,  the  defense  strictly  would  be,  not  by  way  of  denial,  but 
by  pleading  the  alteration,  whereby  the  instrument,  although  ac- 
tually executed  by  defendant,  had  been  rendered  a  nullity. 

In  England  the  rule  that  alteration  nullifies  the  instrument  has 

»8  Rand.  Com.  Paper.  §§  209-215;   Daniel.  Neg.  Inst.  §§  118-127. 
•»  This  is  the  language  of  Neg.  Inst.  L.  §  205. 

100  Wood  V.  Steele,  6  Wall.  80;  ANGLE  v.  INSURANCE  CO.,  92  U.  S.  330'. 
Mersman  v.  Werges,  5  Sup.  Ct.  G5,  112  U.  S.  139;  GREENFIELD  SAV.  BANK 
V.  STOWELL,  123  Mass.  196. 

101  MASTER  V.  MILLER.  4  Term  R.  320.  2  H.  Bl.  140;  Burehfield  v.  Moore^ 
3  El.  &  Bl.  683;  WAIT  v.  POMEROY.  20  Mich.  425;  CITIZENS'  NAT.  BANK 
V.  RICHMOND,  121  Mass.  110;  HORN  v.  NEWTON  CITY  BANK,  32  Kan„ 
518,  4  Pac.  1022;  Burrows  v.  Klunli,  70  Md.  451,  17  Atl.  3TS;  GETTYSBURG' 
NAT.  BANK  V.  CHISOLM,  169  Pa.  St.  5M,  32  Atl.  730;  Exchange  Nat.  Bnnk 
V.  Bank  of  Little  Rock.  7  C.  C.  A.  Ill,  58  Fed.  140.  The  rule  has  been  chnnget* 
in  many  states  by  the  Negotiable  Instruments  Law  (post,  p.  248),  and  in  Eng- 
land by  the  Bills  of  Exchange  Act  (section  64). 


§  105)  REAL  AND  PERSONAL  DEFENSES.  247 

been  carried  to  extreme  limits;  and  upon  the  ground  that  the  party 
stM'kJng  to  enforce  must  preserve  the  integrity  of  the  instrument  it 
has  been  held  that  the  rule  applies  even  though  the  alteration  be  the 
act  of  a  stranger.^"'  In  the  United  States  an  early  departure  from 
the  severity  of  this  rule  was  taken,  and  it  has  been  generally  held 
that  an  alteration  by  a  stranger  is  a  mere  spoliation  or  trespass,  and 
does  not  deprive  the  h  jlder  of  his  right  to  enforce  the  instrument.^"' 
This  is  in  accord  with  the  fundamental  principles  of  contract. 
Equally  so  is  the  rule  that  alterations  made  with  the  consent  of  the 
parties,  or  which  do  not  change  the  effect  or  tenor  of  the  instru- 
ment, do  not  affect  the  validity.  If  the  parties  consent  upon  a  new 
consideration  it  is  a  new  contract,  and  therefore  in  itself  valid. 
Where  there  is  no  benefit  derived  from  either  party  by  the  change, 
and  yet  they  have  knowledge  of  and  assent  to  the  change,  each  par- 
ty makes  the  person  making  the  change  his  agent,  and  ratifies  his 
act.^°*  Where  the  legal  effect  of  the  instrument  is  not  changed  by 
an  alteration,  the  alteration  is  immaterial.  The  liability  sought  to 
be  enforced  against  the  party  is  the  one  which  he  in  the  first  place 
assumed.  The  fact  that  the  verbiage  or  appearance  of  the  instru- 
ment is  changed  is  unimportant.  The  courts  look  to  the  obligation, 
and,  if  that  be  unaltered  in  effect,  then  it  is  enforced.  The  courts 
will  not  allow  justice  to  be  obstructed  for  the  light  reason  that  the 
form  of  the  agreement  is  altered  when  its  substance  remains.    But, 

loj  DAVIDSON  v.  COOPER,  11  Meea  &  W.  795,  13  Mees.  &  W.  343;  Pattln- 
son  v.  Luckley,  L.  R.  10  Exch.  330.  44  Law  J.  Exch.  180;  Pigot's  Case,  11 
Coke,  27. 

103  Rees  V.  Overbaugh,  6  Cow.  740;  Lewis  v.  Payn,  8  Cow.  71;  Nichols  v. 
Johnson,  10  Conn.  192;  Wiclies  v.  Caulli,  5  Har.  &  J.  36;  Den  v.  Wright,  7 
N.  J.  I^aw  (2  Halst.)  176;  Waring  v.  Smyth.  2  Barb.  Ch.  119.  See,  also. 
Bridges  v.  Winters,  42  Miss.  135;  PIERSOL  v.  GRIMES,  30  lud.  129;  Hunt 
V.  Gray,  35  N.  J.  Law,  227;  Lubbering  v.  Kohlbrecher,  22  Mo.  590;  DRUM 
V.  DRUM,  133  Mass.  508;  WHITE  SEWING  MACII.  CO.  v.  DAKIN,  80  Mich. 
581,  49  N.  W.  583.  The  authorities  are  divided  as  to  the  question  upon  whom 
rests  the  burden  of  proof  when  an  alteration  Is  apparent  on  the  face  of  the 
Instrument     Daniel,  Neg.  Inst  §§  1417-1421a. 

10*  National  State  Bank  v.  Rising.  4  Hun,  793;  Commercial  Bank  of  Buffalo 
T.  Warren.  15  N.  Y.  577;  Greonfield  Bank  v.  Crafts,  4  Allen,  447;  Hunting- 
ton V.  Ballou,  2  Lans.  120;  Humphreys  v.  Guillow,  13  N.  H.  385;  Bell  v. 
Maliin.  09  Iowa,  408.  29  N.  W.  331;  Camden  Bank  v.  Hall,  14  N.  J.  Lawr,  583; 
Jackson  v.  Jobuson,  07  Ga.  107;   Canon  v.  Grlgsby,  110  ILL  151,  5  N.  E.  302. 


248  DEFENSES.  (Ch.  7 

provided  the  alteration  be  material,  it  is  not  of  importance  whether 
the  intent  with  which  it  was  made  was  fraudulent  or  innocent.^*** 
A  distinction  in  respect  to  the  intent,  however,  is  to  be  observed. 
While  it  is  conceded  that  any  material  alteration,  however  inno- 
cent the  iutent,  avoids  the  instrument,  and,  moreover,  that  where 
the  holder  has  been  guilty  of  making  a  fraudulent  alteration  he  can- 
not recover  even  upon  the  original  consideration  for  which  the  bill 
or  note  was  given,^**'  yet  it  has  been  held  by  many  cases  that,  if 
the  alteration  was  innocently  made  by  the  holder,  he  can  recover 
upon  the  original  consideration,^"^  provided  the  remedy  over  of  the 
person  sued  has  not  been  prejudiced  by  the  alteration.^"* 

It  is  of  importance  to  observe  that  in  those  states  which  have 
adopted  the  Negotiable  Instruments  Law  the  effect  of  alteration  up- 
on the  rights  of  innocent  purchasers  has  been  substantially  changed 
by  the  provision  that  "when  an  instrument  has  been  materially  al- 
tered and  is  in  the  hands  of  a  holder  in  due  course,  not  a  party  to 
the  alteration,  he  may  enforce  payment  thereof  according  to  its 
original  tenor."  *""  In  other  words,  under  this  enactment  alteration 
has  ceased  to  be  a  real  defense. 


106.  Alterations  are  material 

(a)  Which  purport  to  lessen  or  place  an  additional 
burden  on  any  of  the  parties.  Such  are  changes 
in  the  date,  time,  place,  amount,  or  medium  of 
payment  and  the  rate  of  interest. 

108  Booth  v.  Powers,  56  N.  T.  22;  EVANS  v.  FORETNIAN,  60  Mo.  445;  Heath 
v.  Blake,  5  S.  E.  842,  28  S.  C.  406;  First  Nat.  Bank  v.  Fricke,  75  Mo.  178; 
Eckert  V.  Piekel,  13  N.  W.  708,  59  Iowa,  545;  Vanauken  v.  Hornbeck,  14  N. 
J.  Law,  178.     See,  contra.  Van  Brunt  v.  Eoff,  35  Barb.  501. 

io«  Meyer  v.  Huneke,  55  N.  Y.  412;  Smith  v.  Mace,  44  N.  H.  553;  Warder, 
BushneU  &  Glessner  Co.  v.  Willyard,  49  N.  W.  300,  46  Minn.  531;  BaUard  v. 
Insuiance  Co.,  81  Ind.  239;  Walton  Plow  Co.  v.  Campbell,  52  N.  W.  883,  35 
Neb.  174. 

107  Sloman  r.  Cox,  1  Cromp..  M.  &  R.  471;  Hunt  v.  Gray,  35  N.  J.  Law, 
227;  Matteson  v.  Ellsworth,  33  Wis.  488;  SULLIVAN  v.  RUDISILL,  18  N. 
W.  856,  63  Iowa,  158;   Keene  v.  Weeks,  33  Atl.  446,  19  R.  L  300. 

108  ALDERSON  v.  LANGDALE,  3  Barn.  &  Adol.  660. 
io»Neg.  Inst  L.  §205. 


§  106)  REAL    AND    PERSONAL    DEFENSES.  249 

(b)  Which  purport  to  change  the  liabilities  and  obli- 
gations of  all  or  any  of  the  parties.  Such  are 
the  addition  or  removal  of  the  signature  of  a 
maker,  drawer,  indorser,  payee,  or  co-surety 

(0)  Which  purport  to  change  the  operation  of  the  in- 
strument, or  its  effect  in  evidence.  Such  are 
adding  -words  of  negotiability  or  of  a  special 
consideration  after  value  received,  or  changing 
the  form  of  the  indorsement,  or  changing  the 
liability  from  joint  to  several,  or  from  joint 
to  joint  and  several,  as  the  case  may  be."" 

The  absence  of  a  date  upon  a  negotiable  instrument  at  its  incep- 
tion, or  the  fact  that  it  is  postdated  or  antedated,  may  not  be  mate- 
rial upon  the  question  of  its  validity.  But  when  a  date  has  once 
been  inserted,  and  its  time  of  payment  has  thus  been  fixed,  such 
date  is  material,  and  cannot  be  altered  without  consent.^^*  The 
reason  for  this  is,  in  the  words  of  Justice  Swayne,^^^  that  the  agree- 
ment is  no  longer  the  one  into  which  the  parties  entered.  Its  iden- 
tity is  changed.  Another  is  substituted.  There  is  no  longer  the 
necessary  concurrence  of  minds.  To  prevent  and  punish  such  tam- 
pering, the  law  does  not  permit  the  holder  to  fall  back  upon  the  con- 
tract as  it  was  originally.  In  pursuance  of  a  stern,  but  wise,  policy, 
it  annuls  the  instrument  as  to  the  party  sought  to  be  wronged.     The 

110  Cf.  Neg.  Inst.  L.  §  206.     See,  also,  Id.  §  33. 

111  STEPHENS  V.  GRAHAM,  7  Serg.  &  R.  (Pa.)  505;  Walton  v.  Hastings. 
4  Camp.  223;  .Jacobs  v.  Hart,  2  Starkie,  45;  Outhwaite  v.  Luntley,  4  Camp. 
179;  MASTER  v.  MILLER,  4  Term  R.  320  (in  this  case  it  was  held  that  an 
alteration  of  the  date  of  a  bill  of  exchange,  after  acceptance,  whereby  the 
payment  would  be  accelerated,  avoids  the  instrument,  and  no  action  can  be 
maintained  upon  it,  even  by  an  innocent  holder  for  valuable  consideration); 
Britton  v.  Dierker,  46  Mo.  592;  Owings  v.  Arnot,  33  Mo.  40G;  Crawford  v. 
West  Side  Bank,  2  N.  E.  881,  100  N.  Y.  50.  In  LANGTON  v.  LAZARUS,  5 
Mees.  &  W.  f»29.  which  was  an  action  in  assumpsit  by  the  indorsee  against  the 
acceptor  of  a  bill  of  exchange,  it  was  pleaded  as  a  defense  that  before  the  bill 
came  due,  and  while  it  was  "in  full  force  and  effect,"  the  date  was  altered  by 
the  drawer,  whereby  It  became  void.  The  plea  was  hold  bad,  but  only  for  the 
reason  that  it  did  not  allege  the  alteration  to  have  been  made  after  acceptance. 

»»»  Wood  V.  Steele,  6  Wall.  80. 


250  DEFENSES.  (Ch.  7 

date  is  obviously  a  material  part  of  the  order  or  promise.  It  indi- 
cates the  time  of  its  inception.  It  shows  the  time  of  its  perform- 
ance. And  its  alteration,  if  operative,  would  place  a  different  liability 
upon  the  party  sought  to  be  charged.  For  much  the  same  reason, 
an  alteration  in  a  note  or  bill  which  changes  the  time  of  its  pay- 
ment is  material,  and  discharges  those  parties  who  did  not  authorize 
the  chauge.^^'  This  is  true  whether  the  payment  is  hastened  or  de- 
layed. It  is  no  argument  that  such  acceleration  or  delay  may  be  a 
benefit  to  the  acceptor,  maker,  or  indorsers,  in  any  particular  case. 
The  rule  also  applies  where  the  place  of  payment  is  obliterated,  or 
where  a  place  of  payment  is  inserted,  or  where  the  place  of  pay- 
ment is  otherwise  altered.  Properly  enough,  the  law  does  not  per- 
mit even  a  bona  fide  holder  to  recover  upon  a  bill  or  note  so  altered 
against  the  parties  prior  to  the  one  making  the  alteration.^^*  The 
place,  as  well  as  the  time,  of  payment,  is  an  essential  and  material 
part  of  the  contract  entered  into;  for  on  their  proximity  or  remote- 
ness must  depend,  in  point  of  time,  the  indorser's  knowledge  of  non- 
payment, which  in  most  cases  must  be  to  him  a  matter  of  great  im- 
portance, and  he  cannot  be  charged  with  liability  unless  payment  of 
the  instrument  is  demanded  at  the  time  when  and  the  place  where 
it  is  due;  and,  when  this  is  changed  without  the  indorsers  consent, 
the  alteration  avoids  the  instrument.^^' 

lis  Lee  V.  Murdoch,  4  Pat.  App.  261;  Long  v.  Moore.  3  Esp.  155,  note.  In 
the  case  of  ALDERSON  v.  LANGDALE,  3  Barn.  &  Adol.  660,  the  vendee  of 
goods  paid  for  them  by  a  bill  of  exchange  drawn  by  him  on  a  third  person; 
and,  after  it  had  been  accepted,  the  vendor  altered  the  time  of  payment  men- 
tioned in  the  bill,  and  thereby  vitiated  it.  It  was  held  that  by  so  doing  he 
made  the  bill  his  own,  and  caused  it  to  operate  as  a  satisfaction  of  the  original 
debt,  and  consequently  that  he  could  not  recover  for  the  goods  sold.  MILLER 
V.  GILLELAXD,  19  Pa.  St.  119;  Lewis  v.  Kramer,  3  Md.  265;  Bathe  v.  Taylor, 
15  East.  412;  Benedict  v.  Miner,  58  111.  19;  Lisle  v.  Rogers,  18  B.  Mon.  528; 
Seebold  v.  Tatlie  (Minn.)  78  N.  W.  967. 

11*  Cowie  V.  Halsall,  4  Barn.  &  Aid.  197,  3  Starliie,  36;  Rex  v.  Treble,  2 
Taimt.  328;  Tidmarsh  v.  Grover,  1  Maule  &  S.  733;  NAZRO  v.  FULLER,  24 
Wend.  (N.  Y.)  374;  Sudler  v.  Collins,  2  Houst.  538;  Burchfield  v.  Moore,  25 
Eug.  Law  &  Eq.  123;  Morehead  v.  Parliersburg  Nat  Bank,  5  W.  Va.  74;  Mac- 
intosh V.  Haydon,  Ryan  &  M.  362;  Hill  v.  Cooley,  46  Pa,  St.  259;  White  v. 
Haas,  32  Ala.  430;   Oakey  v.  Wilcox,  3  How.  (Miss.)  330. 

110  Woodworth  v.  Bank  of  America.  19  .Johns.  391;  Wolcott  v.  Van  Santvoord. 
17  Johns.  248;    NAZliO  v.  FULLER,  24  Wend.  374. 


§  106)  REAL   AND    PERSONAL    DEFENSES.  251 

The  amount  to  be  paid  by  the  instrument  cannot  be  changed,  ei- 
ther by  lessening  or  increasing  it,  without  destroying  the  contract. 
Under  this  rule  there  can  be  no  lessening  or  increasing  the  amount 
of  principal, ^^*  nor  adding  words  varying  the  interest  to  be  paid  on 
a  bill  or  note,  either  by  changing  the  per  cent,  or  adding  interest 
where  the  bill  or  note  did  not  before  provide  for  any;  ^^^  nor  by 
altering  the  currency  in  which  payment  is  to  be  made,  nor,  if  the  bill  or 
note  is  payable  in  merchandise,  by  modifying  the  character  or  qual- 

ii«  Goodman  v.  Eastman,  4  N.  H.  455;  BANK  OF  COMMERCE  v.  UNION 
BANK,  3  N.  Y.  230;  STEPHENS  v.  GRAHAM,  7  Serg.  &  R.  (Pa.)  505.  Tr 
the  ease  of  CITIZENS'  NAT,  BANK  v.  RICHMOND,  121  Mass,  110,  the  facts 
were  as  follows:  A  note  for  $500  was  indorsed  for  the  maker's  accommoda- 
tion. Afterwards  the  maimer,  by  means  of  chemicals,  removed  the  original 
amount  of  the  note,  and  inserted  a  lai"ger  amount,  for  which  he  got  the  note 
discounted.  Before  the  note  was  due,  the  alteration  was  discovered,  and  the 
original  writing  restored.  The  note  was  protested,  both  as  a  $500  note  and 
a  $2,000  note,  and  two  notices  were  accordingly  sent.  It  was  held  that  the 
indorser  was  not  liable,  never  having  indorsed  the  $2,000  note,  and  the  $500 
note  having  been  rendered  a  nullity.  See,  also.  YOUNG  v.  GROTE,  4  Bing. 
253.  A  check  drawn  by  a  customer  upon  his  banker  for  a  sum  of  money  de- 
scribed in  the  body  of  the  check  in  words  and  figures  was  afterwards  altered 
by  the  holder,  who  substituted  a  larger  sum  for  that  mentioned  in  the  check, 
in  such  a  manner  that  no  one  in  the  ordinary  course  of  business  could  observe 
it.  The  banker  paid  to  the  holder  this  larger  sum.  It  was  held  that  he  could 
not  charge  the  customer  beyond  the  sum  for  which  the  check  was  originally 
drawn.  HALL  v.  FULLER,  5  Barn.  &  C.  750.  In  the  case  of  MARINE  NAT. 
BANK  V.  NATIONAL  CITY  BANK,  59  N.  Y.  67,  it  was  held  that  where  a 
check  which  had  been  altered  as  to  name  of  payee,  date,  and  amount  had  been 
certified,  and  afterwards  paid  by  the  plaintiff,  such  amount  could  be  recovered 
back  as  money  paid  through  mistake.  But  this  is  inconsistent  with  the  gen- 
eral rule  as  to  the  effect  of  certification.     Post,  p.  419. 

117  Boa  It  V.  Brown,  13  Ohio  St.  3(54;  Waterman  v.  Vose,  43  Me.  504;  Lee 
V.  Starbird,  55  Me.  491;  NEFF  v.  HORNER,  G3  Pa.  St.  327;  Dewey  v.  Reed, 
40  Barb.  IG;  Brown  v.  Jones,  3  Port.  420;  Whitmer  v.  Frye,  10  Mo.  348; 
FAY  V.  SMITH.  1  Allen  (Mass.)  477;  Patterson  v.  McNeeley,  16  Ohio  St.  348; 
McGRATH  V.  CLARK,  56  N.  Y.  34.  In  this  case  a  promissory  note  was  In- 
dorsed by  the  defendant,  but  with  time  and  i)hice  of  payment  left  blank. 
Upon  its  delivery  to  him,  the  maker,  having  filled  In  the  blanks,  added  the 
words  "with  interest."  It  was  held  that,  by  delivery  to  him,  the  maker  was 
authorized  to  fill  In  the  blanks  as  to  time  and  place,  as  he  wished,  but  tliat 
the  mlditlon  of  the  "with  interest"  was  not  authorized,  and  was  such  a  ma- 


252  DEFENSES.  (Cll.  7 

ity  of  the  goods.'*'  The  reason  for  these  rules  is  that,  if  the  amount 
to  be  paid  is  increased  or  lessened,  the  identity  of  the  contract  is 
destrojed.  If  interest  is  added,  it  adds  to  the  burden  borne  by  the 
parties;  if  diminished,  the  effect  of  the  contract  is  changed.  The 
question  to  be  determined  is  whether  the  words  added  or  stricken 
out  were  mere  surplusage,  or  whether  they  were  material  to  the 
obligation  assumed  by  the  parties  to  the  contract.^^* 

The  doctrine  of  the  so-called  "Pigot's  Case,"  ^^^  which  is  the 
source  of  the  doctrine  of  alteration,  has  been  extended  to  every  sit- 
uation where  instruments  are  presented  or  sought  to  be  used  as  evi- 
dence for  the  enforcement  of  an  unexecuted  obligation  or  contract. 
If  there  is  added  or  withdrawn  another  maker  or  drawer,  or  if  a 
person  signs  or  withdraws  his  name  as  a  surety  to  a  note  or  bill 
after  it  is  executed,  such  addition  or  withdrawal  attempts  to  create 
a  new  contract,  and  hence  is  a  material  alteration. ^^^  In  such  ease, 
too,  it  is  not  to  the  point  that  the  alteration  be  or  be  not  to  the  prej- 
udice of  the  party  against  whom  the  liability  is  sought  to  be  en- 
forced.    The  courts  will  not  sit  in  judgment  upon  the  question 

terial  alteration  as  would  invalidate  the  note,  unless  proof  of  authority  beyond 
the  mere  fact  of  delivery  be  shown.  "The  addition  of  the  words  'with  in- 
terest' increased  the  liability  of  the  indorser;  and  the  maker  had  no  more 
right  to  add  those  words  than  he  had  to  increase  the  sum  for  which  the  note 
was  given  by  adding  the  amount  of  the  interest  to  it  for  the  time  the  note 
had  to  run."  Per  Church,  C.  J.  Where  a  payee  or  subsequent  holder  added 
After  the  printed  words  "with  interest  at,"  at  the  end  of  a  promissory  note, 
the  following:  "10  per  cent.,"— without  knowledge  of  the  maker,  it  was  held 
that  such  alteration  would  constitute  a  good  defense  by  the  maker  against  a 
bona  fide  purchaser,  and  would  invalidate  the  note.  HOLMES  v.  TRUMPER, 
22  Mich.  427.  Ivory  v.  Michael,  33  Mo.  398;  WARRINGTON  v.  EARLY,  2  El. 
-&  Bl.  763;   Sutton  v.  Toomer,  7  Barn,  &  C.  416. 

118  Darwin  v.  Rippey,  63  N.  C.  318;  State  v.  Cilley,  quoted  In  1  N.  H.  97; 
Martendale  v.  Follett,  1  N.  H.  95;   Schwalm  v.  Mclntyre,  17  Wis.  232. 

119  GARDNER  v.  WALSH,  5  El.  &  Bl.  83;  Suffell  v.  Bank  of  England,  9  Q. 
B.  Div.  555.  The  test  is  whether  the  legal  damages  contemplated  by  the  par- 
ties were  the  same  as  those  to  be  awarded  by  the  contract  in  its  changed  con- 
dition.    Church  v.  Howard,  17  Hun,  5. 

120  11  Coke,  27. 

121  Clark  V.  Blackstock,  Holt,  N.  P.  474;  Ex  parte  White,  2  Deae.  &  C. 
334;  Bank  of  Limestone  v.  Penick,  5  T.  B.  Mon.  25;  PuUiam  v.  Withers,  8 
Dana,  98;  GARDNER  v.  WALSH,  32  Eng.  Law  &  Eq.  162. 


§  106)  REAL    AND    PERSONAL    DEFENSES.  255 

whether  it  be  to  the  prejudice  of  the  party  aggrieved  or  not.**' 
This  is  also  true  where  the  operation  or  effect  of  the  instrument  i» 
changed,  and  it  operates  differently  from  the  original  instrument. 
If,  for  example,  a  promissory  note,  negotiable,  and  for  the  payment 
of  a  sum  of  money  absolutely  on  its  face,  is  modified  as  to  its  ne- 
gotiability, so  that  it  is  converted  into  a  special  contract,  the  alter- 
ation is  material,  and  avoids  the  instrument.*''^  Where  there  are 
memoranda  upon  the  instrument  which  qualify  it,  and  are  intended 
as  a  substantive  part  of  it,  and  these  are  changed,  the  alteration  is 
material.***  So,  also,  ingrafting  upon  a  joint  note  a  several  obliga- 
tion, or  changing  a  joint  and  several  to  a  joint  note,  destroys  the 
operation  of  the  original  contract,  and  renders  it  void. 

Same — Negligence  Facilitating  Alteration — Estoppel. 

It  is  proper  to  add  to  the  foregoing  rules  a  statement  of  a  limita- 
tion which  has  been  recognized  in  many  cases,  but  which  has  been 
adversely  criticised  or  repudiated  in  others.  The  rule,  briefly  stated, 
is  that  where  the  party  seeking  to  defend  on  the  ground  of  alteration 
has  by  his  negligence  made  the  alteration  possible, — as  where  he  has 
left  space  before  or  after  the  words  or  figures  expressing  the  amount, 
or  written  a  part  of  the  contract  in  such  a  way  that  it  could  be  de- 
tached without  exciting  suspicion,  or  written  part  of  the  instru- 
ment with  pencil, — the  negligent  party  will  be  liable  upon  the  in- 
strument as  altered  to  a  bona  fide  holder.*"     This  rule,  if  it  can  be 

i««  Chappell  V.  Spencer,  23  Barb.  584;  MONTGOMERY  v.  CROSSTHWAIT, 
8  South.  498,  Johns.  Cas.  Bills  &  N.  154,  and  90  Ala.  553. 

123  HARTLEY  v.  WILKINSON,  4  Maule  &  S.  25;  Cholmeley  v.  Darley.  14 
Mees.  &  W.  343;   Leeds  v.  Lancashire,  2  Camp.  205. 

12*  BENEDICT  V.  COWDEN,  49  N.  Y.  396;  Johnson  v.  Heagan,  23  Me.  329; 
Burchfield  v.  Moore,  3  El.  &  Bl.  683;  Simpson  v.  Stackhouse,  9  Pa.  St  (9 
Barr)  186;  WHEELOCK  v.  FREEMAN,  13  Pick.  (Mass.)  165.  In  the  case  of 
WAIT  V.  POMEROY,  20  Mich.  425,  a  memorandum  which  was  written  under 
a  note,  and  by  which  the  obligation  was  qualified,  was  shown  to  have  been 
detached,  and  It  was  held  that  by  such  alteration  a  note,  even  though  in  tlie 
hands  of  a  bona  fide  holder,  is  vitiated.  "If  It  formed  a  part  of  the  original 
contract.  It  was  a  material  alteration  to  detach  the  memorandum,  and  leave 
the  note  as  If  It  had  been  absolute.  And  It  Is  a  principle  well  settled  that 
such  an  alteration  avoids  the  entire  obligation."     Per  Campbell,  C.  J. 

126  YOUNG  V.  GROTE,  4  Bing.  253;  PAGAN  v.  WYLIB,  2  Mor.  Diet.  1600; 
Van  Duzer  v.  Howe,  21  N.  Y.  538;    Isuard  v.  Joni's,  10  La.  Ann.  103;    Uai'vey 


*2o4  DEFENSES.  (Cll.   7 

supported,  must  rest  upon  the  broad  principle  that  a  man  cannot 
complain  of  the  consequences  of  his  own  default  against  a  person 
who  has  bcH-n  misled  by  that  default  without  default  of  his  own; 
in  other  words,  upon  the  principle  of  estoppel.^^* 

107.  FORGERY. — Forgery  of  a  negotiable  instrument, 
or  the  indorsement  thereon,  except  in  case  of  ratification 
or  estoppel,  nullifies  the  instrument  as  to  all  parties 
against  -whom  the  forgery  is  committed.'''^ 

Forgery  means  either  falsely  making,  counterfeiting,  altering, 
erasing,  or  obliterating  a  genuine  negotiable  instrument,  in  whole  or 
in  part,  or  the  false  making  or  counterfeiting  of  the  signature  of  a 
party  thereto,  with  mt^nt  to  defraud.^^*     Its  essential  elements  are 

V.  Smith,  55  111.  224  (condition  written  in  pencil);  Yocum  v.  Smith.  63  111.  321; 
SEIBEL  V.  VAUGHAX,  CO  111.  257;  NOLL  v.  SMITH,  64  Ind.  511;  PIIELAN 
V.  MOSS.  67  Pa.  St.  59;  Walsh  v.  Hunt,  52  Pac.  115.  120  Cal.  46.  In  BROWN 
V.  REED,  79  Pa.  St.  370,  the  note  in  question  had  formed  originally  part  of  a 
contract  so  drawn  that  by  cutting  off  a  part  of  it  a  negotiable  note  was  left. 
It  was  held  that  whether  defendant  was  negligent  in  signing  the  contract  was 
a  question  of  fact  for  the  jui-y.  But  see  GREENFIELD  SAV.  BANK  v. 
STOWELL.  123  Mass.  203;  CAPE  ANN  NAT.  BANK  v.  BURNS,  129  Mass.  596; 
Wait  V.  Pomeroy.  supra;  ScholQeld  v.  Earl  of  Loundesborough  [1896]  App 
Cas.  514.  atliiming  [1894]  2  Q.  B.  6G0  [1895]  1  Q.  B.  536;  and  cases  cited  in 
next  note. 

i2«  Halifax  Union  v.  Wheelwright,  L.  R,  10  Exch.  183,  per  Cleasby,  B. 
There  has  been  much  conflict  of  opinion  as  to  the  principle  on  which  YOUNG 
V.  GROTE,  supra,  and  like  cases  rest,  if,  indeed,  they  are  to  be  supported. 
The  principle  of  avoiding  circuity  of  action  has  been  suggested,  but  the  negli- 
gence of  the  person  issuing  the  instrument  is  not  of  such  nature  as  to  give 
rise  to  a  cross  action  in  favor  of  the  party  misled.  See  1  Ames,  Cas.  Bills  & 
N.  4:91,  note  1.  The  doctrine  deduced  from  Yoimg  v.  Grote,  supra,  has  re- 
cently been  severely  criticised  in  Scholfield  v.  Earl  of  Loundesborough,  supra, 
note  125.  See,  also,  Knoxville  Nat.  Rank  v.  Clark,  1  N.  W.  491,  51  Iowa,  264; 
Burrows  v.  Klunk,  17  Atl.  378,  70  Md.  451;  Exchange  Nat  Bank  v.  Bank  of 
Little  Rock,  7  C.  C.  A.  Ill,  58  Fed.  140;  Rand.  Com.  Paper.  §§  187,  1770; 
Daniel,  Neg.  Inst.  §§  1405-1409.  Cases  where  spaces  are  negligently  left  so 
that  it  is  thereby  made  possible  to  make  a  fraudulent  alteration  are  to  be 
distinguished  from  those  in  which  the  blanks  are  left  for  the  purpose  of  being 
filled  in.     McGRATH  v.  CLARK,  56  N.  Y.  34.     See  post,  p.  258. 

127  Cf.  Neg.  Inst  L.  §  42. 

1"  Pen.  Code  N.  Y.  §  520. 


§  107)  REAL    AND    PERSONAL    DEFENSES.  255 

intent  to  defraud/^®  the  forging  of  the  instrument,  and  its  utter- 
ance or  delivery  by  the  forger.^^"  In  some  of  its  aspects  it  is  close- 
ly akin  to  alteration,  but  is  distinguished  from  it  in  that  its  essen- 
tial element  is  fraudulent  intent,  while  material  alterations  may  be 
innocently  made.  If  innocently  made,  though  the  alteration  be  ma- 
terial, recovery  can  be  had  upon  the  original  consideration,  but,  if 
fraudulently  made,  and  the  alteration  be  material,  no  recovery  can 
be  had  upon  the  instrument  or  upon  the  consideration.^^^  This  rule, 
though  harsh,  is  deemed  -wise,  all  things  considered,  because  forgery 
ought  to  shut  the  doors  of  courts  to  the  forger.  It  is  deemed  the 
wisest  policy  to  punish  his  fraud  by  causing  him  to  lose  all  remedy 
for  the  enforcement  of  his  rights. 

Forgery  creates  no  legal  right  or  obligation  against  the  party 
whose  name  is  forged,  even  though  the  instrument  be  sought  to  be 
enforced  by  a  purchaser  for  value  without  notice.^'*  The  forgery 
is  in  no  wise  the  legal  act  of  this  party.  It  is  the  act  of  some  one 
else  personating  him  without  authority.  In  case  of  an  indorser 
there  is  the  further  reason  that  legal  title  to  an  instrument  nego- 
tiable by  indorsement  can  be  transferred  only  by  the  indorsement  of 
the  legal  holder.^^'  So,  that,  except  in  case  of  ratification  or  es- 
toppel,^^*  in  no  event  is  a  maker,  acceptor,  drawer,  or  indorser  lia- 

129  Daniel,  Neg.  Inst.  §  1349;  Edw.  Bills  &  N.  §  268;  People  v.  D'Argencour, 
32  Hun,  178,  affirmed  95  N.  Y.  624;  Phelps  v.  People,  72  N.  Y.  371. 

130  Daniel,  Neg.  Inst  §  1350. 

131  Booth  V.  Powers,  56  N.  Y.  22;  Meyer  v.  Hun  eke,  55  N.  Y.  412;  Ken- 
nedy V.  Crandell,  3  Lans.  1;  Trow  v.  Glen  Cove  Starch  Co.,  1  Daly,  280; 
Blade  v.  Noland,  12  Wend.  173;  Clute  v.  Small,  17  Wend.  238;  ATKINSON 
V.  HAWDON,  2  Adol.  &  El.  628  (in  this  case  it  was  held  that  if  the  drawer 
sues  the  acceptor  upon  the  bill,  and  fails  in  consequence  of  having  altered  the 
bill  in  a  material  part,  he  may  still  recover  upon  the  counts  on  the  original 
consideration);  Hunt  v.  Gray,  35  N.  J.  Law,  227;  Vogle  v.  Ripper,  34  III. 
100;  Matteson  v.  Ellsworth,  33  Wis.  488.  See,  contra,  Martendale  v,  Follett, 
1  N.  H.  99;   BIGELOW  v.  STILPHEN,  35  Vt.  525.     Ante,  p.  246. 

132  In  the  ease  of  S:\nTH  v.  SHEPPARD,  Chit.  Bills  (10th  Ed.)  note,  it  was 
said  by  Lord  Mansfield  that  "he  that  talves  a  forged  bill  must  al)ide  by  the 
consequence,  for  the  man  whose  name  is  forged  l<nows  nothing  of  it." 

138  SMITH  V.  CHESTER,  1  Term  R.  654;  GRAVES  v.  BANK,  17  N.  Y. 
205;  COLSON  v.  ARNOT,  57  N.  Y.  253;  Palm  v.  Watt,  7  Hun,  317;  MEAD 
V.  YOUNG,  4  Term  R.  28;  LANCASTER  v.  BALTZELL,  7  Gill  &  J.  (Md.) 
468. 

13*  As  to  estoppel  of  acceptor,  see  ante,  p.  146. 


256  DEFENSES.  (Ch.  7 

ble  upon  an  instrument  forged  as  to  him.  Ratification  and  estop- 
pel, however,  take  the  case  from  the  operation  of  the  rule.  Ratifica- 
tion means  the  adoption  by  a  party  of  a  forged  signature  as  his  own. 
Estoppel  means  the  refusal  to  allow  a  party  to  deny  a  forged  sig- 
nature purporting  to  be  his  because  by  his  words  or  conduct  he  has 
induced  some  other  party  to  the  instrument  to  act  to  his  detriment 
upon  the  belief  that  the  forged  signature  is  a  valid  one.  Ratifica- 
tion binds  the  party  because,  according  to  the  general  principles  of 
contract  as  adopted  in  this  country,  a  ratification  made  with  full 
knowledge  binds  a  principal  although  no  antecedent  authority  was 
given.^"  For  there  is  no  sufficient  reason  why,  upon  the  fact  of 
forgery  alone,  a  person  whose  name  has  been  forged  may  not  adopt 
and  afiirm  the  forgery  or  signature  as  his  own  act  and  thereby  sub- 
ject himself  to  whatever  civil  liability  may  follow  it.*'"  Estoppel 
binds  the  party  because  his  treating  the  instrument  as  genuine  fixes 
the  right,  and  he  may  not  overset  the  right  by  afterwards  disputing 
it.  Thus  if  the  maker  of  a  note  or  the  drawer  of  a  bill  issues  it  to 
a  bona  fide  holder  with  forged  or  fictitious  names  upon  it,*'^  or  if 
an  indorser  transfer  an  instrument  upon  which  the  name  of  the 
drawer,  maker,  acceptor,  or  of  a  prior  indorser  is  forged,  then  each 
of  these  parties  is  bound  because  of  estoppel  by  virtue  of  the  reasons 
already  discussed  under  the  head  of  "Warranties."  *" 

It  often  happens,  however,  that  the  forgery  of  the  instrument  is 

»»»  Howard  v.  Duncan,  3  Lans.  174;  Union  Bank  v.  Middlebrook,  33  Conn. 
95;  Thorn  v.  Bell,  Lalor,  Supp.  430;  WELLINGTON  v.  JACKSON,  121  Mass. 
157.  See,  contra,  Shisler  v.  Vandike,  92  Pa.  St.  449;  Brook  v.  Hook,  L.  R.  6 
Exch.  89;  McKenzie  v.  British  Linen  Co.,  44  Law  T.  (N.  S.)  431;  Workman  v. 
Wright,  33  Ohio  St.  495;  Henry  Christian  Building  &  Loan  Ass'n  v.  Walton, 
37  Atl.  261,  181  Pa.  St.  201. 

136  The  student  must  carry  In  mind  that  this  doctrine  Is  by  no  means  set- 
tled. There  Is  authority  against  It,  which  Mr.  Daniel  has  characterized  as 
based  upon  views  of  force.     Neg.  Inst.  §§  1351,  1352,  et  seq. 

18T  HORTSMAN  v.  HEXSHAW,  11  How.  177  (in  this  case  the  bill  had  upon 
It  the  forged  indorsements  of  the  payee,  and  it  was  put  in  circulation  by  the 
drawers.  "By  doing  so,  they  must  be  understood  as  affirming  that  the  indorse- 
ment is  in  the  handwriting  of  the  payees,  or  written  by  their  authority. 
•  •  •  The  drawers  must  be  equally  liable  to  the  acceptor  who  paid  the 
bilL"  Taney,  C.  J.);  Burgess  v.  Northern  Bank,  4  Bush,  600;  COGGILL  T. 
BANK,  1  N.  Y.  113;  Meacher  v.  Fort,  3  Hill  (S.  C.)  227. 

188  See  supra,  p.  162. 


§  107)  REAL    AND    PERSONAL    DEFENSES.  257 

not  detected  until  the  cash  called  for  in  it  is  paid  to  the  ostensible 
holder.  In  such  case  diverse  rights  arise.  The  party  paying  may 
recover  the  amount  paid  from  the  person  paid  on  the  ground  of  pay- 
ment under  a  mistake  of  fact.^^®  And  this  is  so  despite  any  laches 
or  negligence  which  may  be  charged  by  the  person  paid  to  the  per- 
son paying.^***  There  are  two  exceptions  to  this  rule.  One  is  when 
this  payment  is  made  through  negligence  which  results  in  loss.^*^ 
The  other  is  when  a  drawee  pays  a  bill  upon  the  forged  signature  of 
the  drawer  to  a  bona  fide  holder  for  value,  in  which  case  he  is  held 
to  a  knowledge  of  his  correspondent's  signature,**'*  and  therefore 
unable  to  recover  from  the  bona  fide  holder.  If  the  payment  of  pa- 
per negotiable  only  by  indorsement  is  made  by  the  drawee  of  a  draft 
in  good  faith  under  a  forged  indorsement,  it  is,  as  to  the  true  owner 
of  the  draft,  no  payment  at  all,  because  the  forged  indorsement  does 
not  pass  title  to  commercial  paper,  and  the  true  owner  may  therefore 
recover  the  amount  of  the  draft  from  the  drawee,**'  as  though  the 
drawee  had  not  already  made  payment  of  it.***  This  rule  is  extend- 
ed to  persons  claiming  under  the  forged  indorsement  who  have  no 
title  as  against  the  true  owners,  and  to  whom  for  the  same  reason 
payment  cannot  be  lawfully  made.*  Such  persons  must  rely  for 
their  protection  upon  the  warranties  implied  in  the  indorsements  of 
prior  parties,  already  explained.  Thus  the  general  rules  summarized 
are: 

(1)  That  the  payor  can  recover  of  the  payee  claiming  through  a 
forgery. 

18  9  FRANK  V.  LANIER,  91  N.  Y.  112;  Kingston  Bank  v.  Eltinge,  40  N.  Y. 
391;  Heiser  v.  Hatch,  86  N.  Y.  614;  MARINE  NAT.  BANK  v.  NATIONAL, 
CITY  BANK,  59  N.  Y.  67. 

1*0  FRANK  V.  LANIER,  91  N.  Y.  112;  Lawrence  v.  American  Nat.  Bank. 
54  N,  Y.  432;  Young  v.  Lehman,  63  Ala.  523;  Fraker  v.  Little,  24  Kan.  598; 
U.  S.  v.  National  Park  Bank,  6  Fed.  852. 

141  Welch  V.  Goodwin.  123  Mass.  77. 

1*2  Goddard  v.  Merchants'  Bank,  4  N.  Y.  147;  WHITE  v.  B.4.NK,  64  N.  Y. 
316. 

1*3  Citizens'  Nat.  Bank  of  Davenport  v.  Importers'  &  Traders'  Bank,  119 
N.  Y.  195.  23  N.  E.  540;    GRAVES  v.  BANK,  17  N.  Y.  205. 

1**  Bank  of  British  North  America  v.  Merchants'  Nat.  Bank,  91  N.  Y.  10<;. 

•  CANAL  BANK  v.  BANK  OF  ALBANY.  1  Hill  (N.  Y.)  287;  Talbot  v.  Bank 
ef  Rochester,  1  Hill  (N.  Y.)  295;    DICK  v.  LEVERICH,  11  La.  573. 
NEG.BILLS.-17 


258  DKFENSES.  (Ch.  7 

(2)  The  forgery  does  not  destroy  the  title  of  the  true  owner  to  the 
instrument,  nor  the  right  to  collect  it;  and 

(3)  The  sole  recourse  of  parties  claiming  under  the  forgery  is  up- 
on the  warranties  of  parties  prior  to  them  and  subsequent  to  the 
forgery. 

Same — Blanks —  Wlien  may  he  Filled. 

We  have  already  seen  that,  although  a  bill  be  imperfect  for  lack 
of  the  name  of  a  drawer,  if  it  be  accejjted  and  delivered  in  that 
form,  it  operates  as  authority  to  the  legal  holder  to  insert  the 
name  of  a  drawer,  and  thus  perfect  the  instrument.^*'  This  prin- 
ciple is  generally  applicable  where  negotiable  instruments  are  is- 
sued, but  spaces  have  been  left  for  the  insertion  of  material  partic- 
ulars; ^*®  for  example,  the  date,^*'  the  name  of  the  payee,^*^  or  the 
amount,^*"  or  even  where  all  material  terms  remain  to  be  filled 

1*0  Ante,  p.  57. 

I'ls  The  rules  here  stated  are  substantially  enacted  by  Neg.  Inst.  L.  §§  33, 
34>  It  seems,  however,  that  the  English  rule  that  an  unfilled  blank  charges 
the  purchaser  with  notice,  rather  than  the  rule  that  he  may  rely  upon  the 
apparent  authority  of  the  person  to  whom  the  instrument  is  intrusted  to  fill  it 
in,  is  adopted.  Section  33  provides:  "But  If  any  such  instrument,  after  com- 
pletion, is  negotiated  to  a  holder  in  due  course,  it  is  valid  and  effectual  for  all 
purposes  in  his  hands,  and  he  may  enforce  it  as  if  it  had  been  filled  up  strictly 
in  accordance  with  the  authority  given  and  within  a  reasonable  time."  Com- 
pare section  91,  which  defines  a  holder  in  due  course  as  one  "who  has  taken  the 
instrument  under  the  following  conditions:  (1)  That  it  is  complete  and  regular 
upon  its  face,"  etc. 

147  MITCHELL  V.  CULVER,  7  Cow.  (N.  Y.)  336;  PAGE  v.  MORRELL,  3 
Abb.  Dec.  (N.  Y.)  433;  Michigan  Bank  v.  Eldred,  9  Wall.  544;  Shultz  v.  Payne. 
7  La.  Ann.  222;    First  State  Sav,  Bank  v.  Webster  (Mich.)  79  N.  W.  10G8. 

148  CRUCHLEY  V.  CLARANCE,  2  Maule  &  S.  90  (bill  payable  "to  the  order 

of  ."    "The  Issuing  of  the  bill  in  blank  without  the  name  of  the  payee 

■was  authority  to  a  bona  fide  holder  to  insert  the  name").  CRUCHLY  v. 
MANN,  5  Taunt.  529;  RICH  v.  STARBUCK,  51  Ind.  87;  Dinsmore  v.  Duncan, 
57  N.  Y.  573;  Dunham  v.  Clogg,  30  Md.  2&i;  IVES  v.  BANK,  2  Allen  (Mass.) 
23G. 

149  RUSSEL  V.  LANGSTAJ^FE,  2  Doug.  514;  Griggs  v.  Howe,  31  Barb. 
(N.  Y.)  100;  FULLERTON  v.  STURGES,  4  Ohio  St.  529;  FRANK  v.  LIL- 
LIENFELD,  33  Grat.  O'a.)  377;  Greenfield  Sav.  Bank  v.  Stowell,  123  Mass.  196; 
MARKET  &  FULTON  NAT.  BANK  v.  SARGENT,  27  AtL  192,  85  Me.  349; 
Weidman  v.  Symes  (Mich.)  79  N.  W.  894  (interest  clause). 


§  107)  REAL   AND    PERSONAL    DEFENSES.  259 

in.i"     Thus  in  RUSSEL  v.  LAJN^GSTAFFE,^"  already  referred  to, 
where  the  defendant  indorsed  for  G  copper-plate  checks  made  in  the 
form  of  promissory  notes,  but  in  blank,  without  any  sum,  date,  or 
time  of  payment,  and  G  filled  up  the  blanks  as  he  chose,  and  the 
plaintifif  discounted  the  notes,  it  was  held  that  the  defendant  was 
liable  as  indorser;    Lord  Mansfield  saying,  "The  indorsement  on  a 
blank  note  is  a  letter  of  credit  for  an  indefinite  sum."     It  may  be, 
however,  that  the  authority  of  the  person  to  whom  the  instrument 
is  intrusted  is  limited  to  filling  the  blanks  in  a  particular  way,  and 
in  such  case,  if  he  exceeds  his  express  authority,  of  course  neither  he 
nor  any  holder  with  knowledge  that  the  authority  has  been  exceed- 
ed can  recover.     But  any  one  purchasing  the  instrument  as  filled  in, 
in  reliance  upon  its  terms,  would  be  protected.^ "^     Moreover,  a  bo- 
na fide  purchaser  is  protected,  and  may  enforce  the  instrument  as 
filled  in,  even  if  he  had  knowledge  that  the  instrument  had  been  de- 
livered in  its  imperfect  state,  for  he  may  rely  upon  the  apparent 
authority  of  the  person  to  whom  it  was  delivered  to  fill  in  the  blanks 
as  he  sees  fit;  *"'  and  as  against  such  a  holder  the  fact  that  the  ac- 
tual authority  was  exceeded  is  no  defense.     Such  is  the  general  rule, 
at  least  in  the  United  States,  although  in  England  it  is  held  that  an 
unfilled  blank  charges  the  purchaiser  with  notice,  and  that  he  must 
at  his  peril  ascertain  the  extent  of  the  authority  conferred. ^^*     The 
instrument,  when  completed,  takes  effect  as  of  the  time  of  delivery 
by  the  maker.^^'' 

It  is  essential  to  its  validity  that  it  be  delivered  as  a  negotiable 
instrument,  tliat  is,  that  it  be  signed  and  delivered  with  authority  to 

iBo  RUSSEL  V.  LANGSTAFFE,  2  Doug.  514;  VIOLETT  v.  PATTON,  5 
Cranch,  142;   Patton  v.  Shanklin,  14  B,  Mon,  (Ky.)  13. 

151  2  Doug.  514.     Ante.  p.  112. 

162  MONTAGUE  v.  PERKINS,  22  Law  J.  C.  P.  187;  Barker  v.  Sterne.  9 
Exch.  684;  BANK  OF  PITTSBURGH  v.  NEAL.  22  How.  107;  First  Nat. 
Bank  v.  Manufactui'ing  Co.,  03  N.  W.  731.  61  Minn.  274. 

153  Huntington  v.  Bank,  3  Ala.  186;  MITCHELL  v.  CULVER,  7  Cow.  (N. 
Y.)  XW;    Daniel.  Neg.  Inst.  §  148. 

164AWDE  V.  DIXON,  6  Exeh.  8G9;  HATCH  v.  SEARLES.  2  Sraale  &  G. 
147;   2  Ames.  Cas.  Bills  &  N.  8(«. 

165  BARKER  V.  STERNE,  »  Exch.  6»t  (a  bill  delivered  In  Bavaria  with 
blanks  afterwards  filled  In  England  Is  a  foreign  bill);  Snaith  v.  Mingny,  1 
Maule  &  S.  87.  Blanks  must  l>e  filled  within  a  reasonable  time.  Temijle  v. 
Pullen,  8  Exch.  38t>;   Rand.  Com.  I'aper,  i  183. 


260  DEFENSES.  (Ch.  T 

perfect  it  as  such,  for  otherwise  it  can  never  take  effect  as  such,, 
even  in  the  hands  of  an  innocent  purchaser.^'*  Thus,  if  a  man  de- 
liver a  blank  sheet  of  paper,  with  his  signature  thereon,  to  another,, 
with  authority  to  write  over  it  a  note,  and  the  person  to  whom  it  \» 
delivered  does  so,  the  signer  is  liable  to  an  innocent  purchaser  of  th(^ 
note,  although  its  amount  exceed  the  sum  authorized.  On  the  other 
hand,  if  a  man  gives  to  another  a  blank  sheet,  with  his  signature 
thereon,  but  without  authority  to  write  over  it  a  negotiable  instru- 
ment,— for  example,  for  the  purpose  of  furnishing  means  of  identify- 
ing the  signer's  signature, — and  the  other  writes  a  note  over  the 
signature,  and  negotiates  it,  the  signer  is  not  liable,  even  to  a  bona 
fide  purchaser  for  value.^°^  As  has  been  pointed  out,  an  instrument 
with  blanks  purposely  left  to  be  filled  is  to  be  distinguished  from 
one  in  which  spaces  have  been  carelessly  left,  so  that  it  is  thereby 
made  possible  to  raise  the  amount,  or  make  other  fraudulent  addi- 
tions.^'® In  the  latter  case,  if  advantage  is  taken  of  the  maker's 
negligence,  the  addition  is  an  alteration  or  forgery,  and  operates  as- 
a  real  defense,  unless  the  person  who  issued  the  instrument  is  es- 
topped by  his  negligence, — a  question  upon  which  the  authorities 
disagree."" 

108.  Common  personal  defenses  are: 

(a)  Fraud. 

(b)  Duress. 

(c)  "Want  or  failure  of  consideration. 

(d)  Illegality,  unless  the  contract  is  declared  void  by 

statute. 

(e)  Payment,  or  renunciation  or  release,  before  matur- 

ity. 

(f)  Discharge  of  party  secondarily   liable   by  release 

of  prior  party. 

1B8BAXENDALE  v.  BENNETT.  3  Q.  B.  Div.  525  (where  blank  acceptance 
was  stolen);  Ledwlch  v.  McKim,  53  N.  Y.  307.     Cf.  Neg.  Inst  L.  §  M. 

167  CAULKINS  v.  WHISLER.  29  Iowa,  495;   NANCE  v.  LARY,  5  Ala.  370, 

158  Ante,  p.  254,  note  126. 
1B9  Ante,  p.  253. 


§  108)  REAL   AND    PERSONAL    DEFENSES.  261 

The  student  has  already  seen  the  reason  of  the  classification  of 
defenses  into  real  and  personal.  Keal  defenses  avail  against  a  bona 
fide  holder;  personal  defenses  do  not.  Real  defenses  avail  because 
the  right  sought  to  be  enforced  never  existed  or  has  ceased  to  exist, 
and  therefore  the  bona  fide  holder  can  acquire  none.^*"  Personal  de- 
fenses do  not  avail  because  they  do  not  invalidate  the  instrument, 
and  a  bona  fide  purchaser,  having  acquired  the  legal  title  to  it,  with- 
out notice,  may  enforce  it  irrespective  of  the  existence  of  circumstan- 
ces which  would  have  made  enforcement  by  prior  holders  inequita- 
ble. For  example,  bills  or  notes  whose  execution  or  indorse- 
ment was  procured  by  fraud  are  not  enforceable  between  the  origi- 
nal parties,  because,  but  for  the  fraud,  the  defrauded  party  would 
not  have  executed  or  indorsed  the  instrument.  If  they  are  defective 
in  point  of  consideration  there  is  nothing  to  sustain  the  contract,  and 
it  must  fall  to  the  ground.  If  the  consideration  of  the  instrument 
or  that  of  its  indorsement  is  illegal,  then  to  allow  the  enforcement 
of  the  contract  in  violation  of  law  would  be  a  legal  absurdity,  and 
60  in  these  and  many  other  cases  relief,  as  between  immediate  par- 
ties, is  allowed  by  courts  to  the  person  wronged.  But  throughout 
them  the  student  will  notice  that  there  is  running  one  common  char- 
acteristic. They  all  are  based  upon  some  personal  act  or  omission 
of  a  nature  such  that  to  enforce  the  instrument  as  between  parties 
would  be  to  enable  the  prosecuting  party  to  profit  by  his  own  fraud, 
or  take  advantage  of  his  own  wrong,  or  found  a  claim  upon  his  own 
iniquity.  Courts  will  not  lend  their  active  aid  to  one  guilty  of  such 
unconscientious  conduct,  or  to  one  who  is  in  equal  wrong  with  the 
defendant  touching  the  transaction  as  to  which  relief  is  sought.  By 
allowing  the  defense  this  will  leave  the  parties  where  they  find 
them,  without  interfering  in  behalf  of  either.  The  maxim  is  that 
^*he  who  comes  into  equity  must  come  with  clean  hands,"  and  the 
courts,  as  between  immediate  parties,  will  not  enforce  the  contract 
in  favor  of  one  who  is  not  justly  and  legally  entitled  to  its  enforce- 
ment. But  this  principle  does  not  apply  to  the  bona  fide  holder  who 
is  not  a  party  to  the  transaction.  He  has  committed  no  wrong.  He 
knows  of  no  wrong.     He  has  ijaid  value  for  the  instrument,  and  pur- 

leoThe  above  statement  Is  subject  to  qualiHcalion,  for  in  cerlaiii  cases  the 
•^lefcridaiit  is  estopped  as  against  a  bona  fide  iiurcbaser  from  deuyliij;  the  exe- 
*.-uLion  of  the  iustiumeut,  although  he  in  fact  never  exeeuUd  iL     I'otit,  p.  2G6k 


262  DEFENSES.  (Ch.  7 

chased  what  he  supposed  was  a  good  legal  title  to  enforce  all  the 
rights  it  contained  or  evidenced.  Therefore,  so  far  as  the  act  of  any 
third  party  is  concerned,  both  he  and  the  party  complaining  of  the 
wrong  are  equally  innocent.  But  the  bona  fide  holder  has  the  supe- 
rior equity,  in  that  he  has  the  legal  title  to  the  instrument,  and  for 
the  further  reason  that  of  two  innocent  parties — the  party  wronged 
and  the  bona  fide  holder — he  whose  act  or  omission  has  caused  the 
loss  must  bear  it.  Therefore,  as  between  these  two  innocent  par- 
ties, a  defense  caused  by  the  act,  omission,  conduct,  or  agreement 
of  the  wronged  person  with  reference  to  the  instrument  is  not  al- 
lowed to  the  wronged  person  against  the  bona  fide  holder.  And 
thus,  in  dealing  with  defenses  to  actions  upon  bills  and  notes  in  the 
hands  of  bona  fide  holders,  the  first  question  for  the  student  to  ask 
himself  is  whether  the  defense  is  real  and  valid,  or  personal  and  not 
available. 

109.  FRAUD. — Where  a  person  is  induced  by  fraud  to 
execute  a  bill  or  note,  he  is  liable  thereon  as  against  a 
bona  fide  purchaser  for  value. 

110.  Where  a  person  is  induced  by  fraud  to  sign  a  bill 
or  note  under  the  belief  that  he  is  signing  a  different  in- 
strument, his  signature  is  null  and  void,  and  he  is  not  li- 
able thereon,  even  as  against  a  bona  fide  purchaser  for 
value,  provided  that  in  so  signing  he  acted  -without  neg- 
ligence.'" 

It  is  very  difficult  to  furnish  the  student  with  any  clear  and  cer- 
tain tests  to  determine  in  all  cases  the  meaning  of  the  defense  of 
fraud  in  the  inception,  making,  or  transfer  of  a  negotiable  instru- 
ment. The  principal  reason  why  fraud  is  ordinarily  a  personal  de- 
fense is  that  it  renders  the  contract  voidable  at  the  option  of  the 
defrauded  party,  because,  but  for  the  fraud,  he  would  not  have  en- 
tered into  it.  But  the  acts,  omissions,  concealments,  or  conduct 
which  go  to  make  up  the  legal  conception  of  fraud  are  in  their 
nature  so  multiform  that  to  cover  their  many  phases  by  a  set  of 
concise  definitions  is  well-nigh  impossible.     Mr.   Bomeroy  says  of 

"1  Chalm.  Bills  &  N.  ait,  52.     Cf.  article  94. 


^5    10:)-1I0)  REAL    AND    PERSONAL    DEFENSES.  263 

fiiiud  geuerally  that  it  includes  "all  willful  or  intentional  acts,  omis- 
sions, or  concealments  which  involve  a  breach  of  either  legal  or 
equitable  duty,  trust,  or  confidence,  and  are  injurious  to  another,  by 
which  an  undue  or  unconscientious  advantage  over  another  is  ob- 
tained." ^^^  Sir  William  Anson  declares  the  test  in  determining 
finud  to  be  whether  under  the  circumstances  an  action  for  deceit 
a<;aiiist  the  party  committing  the  fraud  will  lie,  and  speaks  of  a 
fraud  "as  a  false  representation  of  fact,  made  with  a  knowledge  of 
its  falsehood,  or  in  reckless  disregard  whether  it  be  true  or  false, 
with  the  intention  that  it  should  be  acted  upon  by  the  complaining 
party,  and  actually  inducing  him  to  act  upon  it."  ^"  And  the  text 
writers  upon  Ck)ntracts  generally,^'*  treating  it  as  a  matter  of  mis- 
representation, which  it  usually  is,  analyze  fraud  along  the  lines  of 
Sir  William  Anson's  definition,  and,  resolving  it  into  the  constituent 
elements,  say  that  there  must  be  (1)  false  representation  of  a  past 
or  existing  material  fact,  (2)  such  that  the  other  party  has  a  right 
to  rely  upon  it,  (3)  made  with  either  knowledge  of  its  falsity,  or  with 
reckless  disregard  whether  it  be  true  or  false,  (4)  intended  to  be 
brought  to  the  knowledge  of  the  other  party,  (5)  and  that  it  must 
deceive  the  other  party,  and  (6)  result  in  injury  to  him.^*°  Sufiice  it 
to  say,  with  regard  to  these  general  statements,  that  they  often  fur- 
nish the  test  in  determining  fraud  in  the  case  of  the  giving  of  nego- 
tiable instruments  as  well  as  of  their  indorsements.  Their  meaning 
and  practical  application,  however,  are  so  fully  discussed  in  elemen- 
tary works  on  Contracts  that  it  is  unwise  to  give  further  space  to 
the  question  here.^'* 

182  Pom.  Eq.  Jur.  §  873. 

i«3  Anson,  Cont.  pp.  153,  154. 

i«*  Chit.  Cont.  p.  ?50  et  seq.;  Pol.  Cont.  p.  512  et  seq.;  2  Pars.  Cont.  760 
et  seq.;    Lawson,  Cont.  §  226  et  seq.;    Clark,  Cont.  p.  324  et  seq. 

186  Clark,  Cont  p.  324. 

188  Civ.  Code  N.  Y.  1879,  §§  757,  758.  Tbe  proposed  New  York  Civil  Code 
classified  and  defined  fraud  thus:  "Actual  fraud  consists  in  any  of  the  fol- 
lowing acts  committed  by  a  party  to  the  contract,  or  with  his  connivance, 
with  Intent  to  deceive  another  party  thereto,  or  to  Induce  him  to  enter  Into 
the  contract  Its  elements  are  (1)  the  sugjfostion  as  a  fact  of  tJiat  which  is 
not  true  by  one  who  does  not  believe  It  to  be  true;  (2)  the  positive  assertion 
in  a  manner  not  wanantcd  by  the  information  of  the  person  making  it  of  that 
which   iH  nut   true,   though   he   believes   it   lo   be   true;   (o)   the  supprebsiuu   of 


264  DEFENSES.  (Ch.  7 

With  negotiable  instruments  the  question  that  principally  con 
cerns  us  is  the  position  of  the  bona  fide  holder.  Fraud  is  always  a 
defense  against  immediate  parties  or  subsequent  holders  with  notice 
of  the  fraud,  but  it  is  not,  in  general,  a  defense  against  purchasers 
for  value  without  notice.^'^  This  is  because  a  contract  once  entered 
into,  although  induced  by  fraud,  is  voidable,  and  not  void.  The 
defrauded  party  has  the  right  to  disailfh-m,  but  his  right  to  disaffirm 
is  conditional  upon  his  restitution  of  the  other  party  to  the  coudi 
tion  in  which  he  would  have  been  if  the  contract  had  not  been  made: 
and,  if  the  contract  be  one  of  sale,  the  right  of  rescission  is  not  avail- 
able against  one  who  has,  for  value,  acquired  an  interest  in  the  thing 
sold  without  notice.  This  rule  is  an  application  of  the  principle 
that,  when  one  of  two  innocent  parties  must  suffer  for  the  fraud  of 
another,  the  loss  shall  fall  upon  the  one  who  enabled  the  third  party 
to  commit  the  fraud.  Hence  a  bill  or  note  once  executed  is  none 
the  less  valid  because  obtained  by  fraud.  The  defrauding  party  to 
whom  it  is  delivered  acquires  a  title  to  the  instrument,  which,  al- 
though defeasible  while  in  his  hands,  is  legal,  and  which  he  may 
transfer,  and  which,  when  transferred  to  a  bona  fide  purchaser, 
becomes  thereby  indefeasible.  It  may,  therefore,  be  laid  down 
broadly  that,  when  a  man  executes  a  negotiable  instrument  un- 
derstandingly,  it  is  never  a  defense,  as  against  a  bona  fide  pur- 
chaser, that  the  maker's  consent  to  the  execution  was  obtained  by 
fraudulent  representation,  or  was  otherwise  induced  by  fraud.^*® 

that  which  Is  true  by  one  having  knowledge  or  belief  of  the  fact;  (4)  a  promise 
made  without  any  intention  of  performing  it;  (5)  any  other  act  fitted  to 
deceive.  Constructive  fraud  consists  (1)  in  any  breach  of  duty  which,  with- 
out an  actually  fraudulent  intent,  gives  an  advantage  to  the  person  in  fault, 
or  any  one  claiming  under  him,  by  misleading  another  to  his  prejudice,  or  to 
the  prejudice  of  any  one  claiming  under  him;  (2)  In  any  such  act  or  omission 
as  the  law  specially  declares  to  be  fraudulent,  without  respect  to  actual  fraud." 

187  See  Neg.  Inst  L.  §  94. 

168  Vosburgh  v.  Dlefendorf,  119  N.  Y.  357,  23  N.  E.  801;  Justh  v.  National 
Banli  of  the  Commonwealth,  56  N.  Y.  478;  First  Nat.  Bank  of  Cortland  v. 
Green,  43  N.  Y.  298;  Farmers'  &  C.  Bank  v.  Noxon,  45  N.  Y.  7G2;  Ocean 
Nat.  Bank  v.  Carll,  55  N.  Y.  440;  GROCERS'  BANK  v.  PENFIELD.  69  N.  Y. 
502;  Nickerson  v.  Ruger,  76  N.  Y.  279;  Stewart  v.  Lansing,  104  U.  S.  505; 
SMITH  V.  LIVINGSTON,  111  Mass.  342;  Sullivan  v.  Langley,  120  Mass.  437; 
HAYES  V.  CAULFIELD,  5  Q.  B.  81;  Southwlck  v.  First  Nat.  Bank  of  Memphis, 
84  N.  Y.  420;   GRIDLEY  v.  BANE.  57  111.  529;  Ormsbee  v.  Howe,  54  Vt  182; 


§§  109-110)  REAL    AND    PERSONAL    DEFENSES.  265 

A  different  question  is  presented,  however,  when  the  fraud  or  mis- 
representation relates  to  the  character  of  the  instrument,  and  the 
maker  is  thereby  induced  to  sign  and  deliver  it  in  the  belief  that 
it  is  an  instrument  of  a  different  character.  In  such  case  the  minds 
of  the  parties  never  meet,  for  the  defrauded  party  thinks  he  is 
signing  one  instrument,  and  the  defrauding  party  is  aware  that  the 
signer  is  signing  a  different  instrument.  The  case  is,  in  effect,  one 
of  mistake,  induced  by  fraud. ^^^  Under  these  circumstances  the 
signer  is  not  a  party  to  the  instrument  actually  delivered,  and  can- 
not be  held  liable  upon  it,  even  by  a  bona  fide  purchaser,  unless  he 
is  estopped  from  maintaining  the  defense  of  fraud  by  reason  of  his 
negligence.^ '°  This  defense  is  frequently  successfully  interposed  by 
persons  who,  from  infirmity,  blindness,  or  illiteracy,  are  unable  to 
read  what  they  sign,  and  who  are  thereby  imposed  upon.^''*  It  is 
<ivident,  however,  that  cases  in  which  the  qualification  of  this  rule 
does  not  apply,  namely,  in  which  the  party  imposed  upon  has  not 
been  guilty  of  negligence,  are  rare;  and  the  majority  of  the  cases 
properly  lay  down  the  rule  that  the  failure  of  the  maker  or  acceptor 
to  use  all  means  to  ascertain  the  nature  and  character  of  the  instru- 
ment he  signs  1.3  negligence  which  makes  him  liable  to  the  bona  fide 
holder.-''* 

Clark  V.  Tanner,  38  S.  W   11,  100  Ky  275;   David  v.  Bank  (Ky.)  45  S.  W.  878; 
Rand.  Com.  Paper,  §  1891. 

169  A  mere  mistake  as  to  one  of  the  terms  of  the  instrument— as  Inserting 
a  wrong  date — is  not  a  defense  against  a  bona  fide  purchaser.  HUSTON  v. 
YOUNG,  33  Me.  85. 

170  FOSTER  V.  MACKINNON,  L.  R.  4  C.  P.  704  (leading  case);  PUTNAM 
V.  SULIjIVAN,  4  Mass.  45;  National  Exeh.  Bank  v.  Veneman,  43  Hun,  241. 
Misrepresentation  as  to  nature  and  effect,  where  maker  knew  he  was  sign- 
ing a  note,  held  no  defense  against  bona  fide  holder  under  statute  substantially 
enacting  doctrine  of  FOSTER  v.  MACKINNON.  Yellow  Medicine  Co.  Bank 
V.  Tagley,  59  N.  W.  486,  57  Minn.  391. 

iTi  Walker  v.  Ebert  29  Wis.  194  (defendant  unable  to  read  or  write  Eng- 
lish); Whitney  v.  Snyder,  2  Lans.  (N.  Y.)  477;  Fenton  v.  Robinson,  4  Hun 
(N.  Y.)  252;  Puffer  v.  Smith,  57  111.  527;  GREEN  v.  WILKIE,  66  N.  W.  1046. 
98  Iowa,  74;   Llndley  v.  Hofman,  53  N.  E.  471,  22  Ind.  App.  237. 

172  CHAPMAN  V.  ROSE,  56  N.  Y.  137;  National  Exch.  Bank  v.  V.mu>iii,ih, 
43  Hun.  241;  DOUGLASS  v.  MATTING,  29  Iowa,  498;  Snirts  v.  Overjohn. 
60  Mo.  315;  Ort  v.  Fowler,  31  Kan.  478,  2  Pac.  .^)S0:  MaoUey  v.  Potrr.sou,  29 
Minn.  298,   13  N.  W.  132.     But  see.  coutru,  llubbard  v.  Rauklu,  71   IlL    129. 


2G6  DEFENSES.  (Cll.  7 

fn  the  class  of  cases  last  considered  the  liability  of  the  defend- 
ant upon  an  instrument  which  he  never  executed  rests  upon  the 
principle  of  estoppel,  whereby  he  is  precluded,  by  reason  of  his  neg- 
ligence, from  denying  that  the  instrument  which  he  in  fact  signed 
and  delivered  was  really  executed  by  him.  The  principle  of  estop- 
pel is  also  invoked  in  favor  of  bona  fide  purchasers  in  cases  where 
the  defendant  signed  the  instrument  upon  which  he  is  sought  to 
be  charged,  but  never  delivered  it.  This  principle  is  generally  ap- 
plied (1)  where  delivery  is  wrongfully  made  by  a  person  to  whom 
the  instrument  is  intrusted  by  the  maker;  and  (2)  in  many  jurisdic- 
tions, where  there  is  in  fact  no  delivery,  but  the  completed  instru- 
ment is  wrongfully  taken  from  the  possession  of  the  maker. 

governed  by  statute;  Gibba  v.  Linabury,  22  Mich.  492.  It  seems  that  the 
rule  where  the  maker  is  induced  to  sign  by  fraud  under  the  belief  that  he 
is  signing  an  instrument  of  a  different  character  would  be  the  same  under 
the  Negotiable  Instruments  Law.  Section  94  (post,  p.  451)  provides  that  "the 
title  of  a  person  who  negotiates  an  instrument  is  defective  *  •  *  when  he 
obtained  the  instrument,  or  any  signature  thereto,  by  fraud,"  etc.;  and  section 
96  provides  that  a  "holder  in  due  course  holds  the  instrument  free  from  any 
defect  of  title  of  prior  parties,"  etc.;  but  these  sections  should  be  read  in  the 
light  of  the  existing  law.  Such  has  been  the  ruling  in  England  under  the 
somewhat  different  language  of  the  Bills  of  Exchange  Act,  §  29,  subd.  2,  which 
reads:  "The  title  of  a  p€*rson  who  negotiates  a  bill  is  defective  •  •  • 
when  he  obtained  the  bill,  or  the  acceptance  thereof,  by  fraud,"  etc.  LEWIS 
V.  CLAY,  42  Sol.  J.  151.  This,  however,  was  not  the  case  of  a  "holder 
in  due  course,"  but  of  a  payee  who  took  notes  for  value,  and  in  good  faith. 
Defendant's  signature  was  obtained  by  an  elaborate  fraud,  practiced  by  a 
friend,  in  the  belief  that  he  was  signing  private  family  documents  of  the  other 
as  a  witness.  The  jury  found  tliat  defendant  was  not  negligent,  and  that 
he  signed  in  misplaced  confidence  in  the  statements  of  his  friend.  The  court 
held  that  he  was  not  estopped  from  setting  up  the  facts,  and  that  they  afforded 
a  defense.  Lord  Russell  said:  "There  is  nothing  in  the  act  which  prevents 
the  defendant  from  setting  up  the  defense  that  he  never  made  the  promissory 
notes  in  question, — which  is  the  real  defense  here.  *  *  *  It  was  admitted 
that  the  case  of  FOSTER  v.  MACKINNON  [supra]  is  in  point,  and  is  an  au- 
thority binding  on  me  if  the  Bills  of  Exchange  Act  of  1SS2  has  not  altered 
the  law  as  there  declared.  I  find  that  the  law  has  not  been  so  altered.  *  *  • 
They  [the  authorities  cited]  are  all  cases  where  the  bills  or  notes  had  been 
negotiated  to  persons  now  called  'holders  in  due  course.'  It  follows  if  such 
u  holder  cannot,  in  a  case  like  the  present,  recover,  a  fortiori,  that  the  plain- 
tiT— who,  as  named  payee,  is  one  of  the  immediate  parties — cannot  recover."' 


$§  109-110)  REAL    AND    PERSONAL    DEFENSES.  2G7 

In  case  of  delivery  through  fraud  or  violation  of  the  tmst  reposed 
in,  or  of  the  instructions  given  to,  an  agent  or  to  a  third  party  who 
holds  the  instrument,  the  cases  are  of  two  classes.  The  person  hold- 
ing the  bill  or  note  may  be  either  an  agent,  or  merely  its  custodian. 
In  case  of  agency,  the  principal  has  parted  with  the  paper  with  the 
intention  of  disposing  of  it,  though  in  its  disposition  the  agent  has 
committed  a  fraud,  breach  of  trust,  or  acted  in  violation  of  his  prin- 
cipal's instructions.  In  case  of  paper  held  by  a  custodian,  there  is 
no  intention  of  the  person  sought  to  be  charged  to  part  with  the 
paper  until  some  event  or  contingency  has  happened,  in  which  case 
the  holder  is  empowered  and  becomes  an  agent  to  deliver.  In  both 
of  these  classes  the  balance  of  equities  is,  on  the  one  hand,  between 
the  undoubted  legal  proposition  that  no  man  can  be  divested  of  his 
own  property  without  his  own  consent,  and  that  consequently  even 
the  honest  purchaser  of  personal  property  cannot  hold  against  the 
true  proprietor,  and,  on  the  other  hand,  the  fact  that  the  party 
sought  to  be  charged  and  the  bona  fide  purchaser  are  equally  inno- 
cent of  wrong,  and  one  of  them  must  suffer  a  loss.  The  adjustment 
of  these  conflicting  equities  turns  upon  the  point  that  the  party 
sought  to  be  charged  has  by  his  voluntary  act  conferred  upon  the 
agent  or  custodian  through  whom  the  bona  fide  purchaser  derives 
his  title  either  the  apparent  right  of  property,  as  owner,  or  of  dis- 
posal, as  agent,  or  else  has  clothed  him  with  such  evidence  of  the 
right  to  transfer  as  to  imply  authority  of  disposal.  And  the  prin- 
ciple applies  that  where  one  of  two  innocent  parties  must  suffer 
by  the  fraud  or  wrong  of  a  third  person,  the  one  who  put  it  in  the 
power  of  such  third  person  to  commit  such  fraud  or  wrong  must 
bear  the  loss.^^' 

In  the  second  class  of  cases  just  mentioned, — that  is,  where  the 
completed  instrument  is  stolen  or  otherwise  wrongfully  taken  j"rom 
the  possession  of  the  maker,  and  afterwards  indorsed  by  the  payee, 
or  if  the  paper  is  payable  to  bearer  negotiated  by  delivery, — it  la 
forcibly  urged,  on  the  one  hand,  that  the  iustrumeut  never  had  an 

»Tt  Redlich  V.  Doll.  54  N.  Y.  234;  Saltus  v.  Everett.  20  Wend.  (N.  Y.)  2(17; 
VALLKIT  V.  PAItKER.  6  Wend.  (N.  Y.)  015;  Smith  v.  Moberly.  10  B.  Mon. 
(Ky.)  2t;9;  Passumpsic  Hnnk  v.  Cops,  :',1  Vf.  .'',1.".;  I'.onrn'r  v.  N('Is<in,  57  G:i. 
4:'.3;  KKARING  v.  CLARK,  16  Gray  (Mass.)  74  (note  delivered  In  escrow); 
Yellow  Medicine  Co.  liauli  v.  Tugley,  5U  M.  VV.  4t>G,  57  Allmi.  3i>l. 


268  DEFENSES.  (Cll.   7 

inception,  and  hence  cannot  be  the  foundation  of  any  liability;  and 
for  this  reason  it  has  been  held  by  some  cases  that  the  want  of 
delivery  is  a  defense  even  against  a  bona  fide  purchaser.^''*  On  the 
other  hand,  it  is  urged  that  the  bona  fide  purchaser  under  such  cir- 
cumstances is  entitled  to  the  same  protection  that  he  receives  when 
he  has  purchased  paper  payable  to  bearer,  which,  having  been  duly 
issued,  was  afterwards  stolen  from  the  legal  holder,  and  negotiated ; 
and  it  is  accordingly  held  by  other  cases  that  against  a  bona  fide 
holder  it  is  no  defense  that  the  paper  was  stolen  from  the  maker.^^'* 
It  is  impossible  to  support  these  decisions  upon  any  theory  of  negli- 
gence attributable  to  the  maker,  for  in  many  cases  there  was  no 
negligence,  or  upon  any  theory  of  contract;  but  they  are  rather  to 
be  supported  as  an  application  or  extension  of  the  policy  of  the  law 
which  seeks  to  secure  the  free  and  unrestrained  circulation  of  com- 
mercial paper.  As  we  have  seen,^^'  where  the  instrument  has  been 
signed,  but  not  filled  out,  this  exception  does  not  apply;  although  it 
is  difficult  to  distinguish  this  case  from  the  last.  Of  course,  if  the 
maker  actually  delivers  the  paper,  leaving  blanks,  another  prin- 
ciple applies,  for  the  bona  fide  purchaser  is  justified  in  relying  upon 
the  apparent  agency  of  the  person  to  whom  the  paper  is  intrusted 
to  fill  it  out  as  he  sees  fit^'' 

Duress. 

Duress,  as  applied  to  bills  and  notes,  consists  in  actual  or  threat- 
ened violence  or  imprisonment.     The  subject  of  it  must  be  the  con- 

174  HALL  V.  WILSON,  16  Barb.  (N.  Y.)  548;  BURSON  v.  HUNTINGTON, 
2]  Mich.  415;   PALMER  v.  POOR,  121  Ind.  135,  22  N.  E.  984. 

17 B  GOULD  V.  SEGEE,  5  Duer  (N.  Y.)  2G0;  SHIPLEY  v.  CARROLL,  45  111. 
285;  Clarke  v.  Johnson,  54  Dl.  296;  KINYON  v.  WOHLFORD,  17  Minn.  239 
(Gil.  215);  WORCESTER  CO.  BANK  v.  DORCHESTER  &  M.  BANK,  10  Cush. 
(Mass.)  488  (bank  notes  stolen);  COOKE  v.  U.  S.,  91  U.  S.  389  (United 
States  treasury  notes  surreptitiously  put  into  circulation).  See  Daniel,  Neg. 
Inst.  §§  837-840. 

17  6  Ante,  p.  2G0. 

177  Redlich  V.  Doll,  54  N.  Y.  234;  MITCHELL  v.  CULVER,  7  Cow.  (N.  Y.) 
336;  PAGE  v.  MORRELL,  *42  N.  Y.  117;  GARRARD  v.  HADDAN,  67  Pa. 
St.  82;  YOUNG  V.  GROTE,  4  Ring.  253;  Kitchen  v.  Place,  41  Barb.  (N.  Y.) 
465;  DOUGLASS  v.  MATTING,  29  Iowa,  498;  McDonald  v.  Muscatine  Nat. 
Bank,  27  Iowa,  319;  Harris  v.  Berger,  15  N.  Y.  St.  Rep.  389;  Town  of  Solon 
V.  Williamsburgh  Sav.  Bank,  114  N.  Y.  122,  at  page  136,  21  N,  E.  1G8;  DAVIS 
SEWING  MACH.  CO.  v.  BEST,  105  N.  Y.  59,  11  N.  E.  146.     See  ante,  p.  258. 


§§  109-110)  REAL    AND    PERSONAL    DEFENSES.  269" 

tracting  party  himself,  or  his  wife,  parent,  or  child.  It  must  be 
inflicted  or  threatened  by  the  other  party,  or  else  by  one  acting  with 
his  knowledge  and  for  his  advantage.^^* 

The  doctrine  of  some  of  the  authorities  is  that  a  bona  fide  pur- 
chaser for  value  does  not  acquire  a  good  title  to  paper  which  he 
has  bought  from  one  who  has  procured  it  by  duress.  They  dis- 
tinguish duress  from  fraud  in  that  in  case  of  fraud  there  is  ordi- 
narily a  voluntary  execution  of  the  instrument,  and  an  uncontrolled 
volition  to  pass  the  title.  But  in  case  of  duress,  where  there  exists 
coercion,  threats,  or  compulsion,  there  is  no  such  volition.  There 
is  no  intention  nor  purpose  but  to  yield  to  moral  pressure  for  relief 
from  it,  and  therefore  it  is  maintained  that  a  case  is  thus  presented 
more  analogous  to  a  parting  with  property  by  robbery,  and  that  no 
title  can  be  made  through  a  possession  thus  acquired.^^*  This  posi- 
tion is  certainly  logical.  But  in  criticism  of  the  authorities  cited 
it  may  be  said  that,  so  far  as  they  relate  to  ijegotiable  paper,  they 
do  not  bear  out  what  is  claimed  for  them  by  the  text  writers.^*** 
Lcomis  V.  Ruck  and  Barry  v.  Equitable  Life  Assurance  Society  are 
illustrations.  In  Loomis  v.  Ruck  the  signature  of  a  married  woman 
was  given  under  duress  to  a  note  for  the  sole  benefit  of  her  hus- 
band, to  the  plaintiff,  who,  at  the  time  of  the  duress,  was  present. 
It  is  true  that  the  statement  of  the  New  York  court  of  appeals  was 
that  a  bona  fide  holder  cannot  enforce  a  note  against  the  maker 
which  was  given  by  him  under  duress,  but  this  statement  is,  in 
fact,  obiter  dictum,  because  the  plaintiff  in  the  case  was  not  a 
bona  fide  holder.  Neither  does  the  case  of  Barry  v.  Equitable  Life 
Assurance  Society  affect  the  position,  because  that  relates  to  the 
assignment  of  a  life  insurance  policy,  which  is  a  mere  chose  in  ac- 
tion, to  which  the  doctrines  of  negotiability  do  not  attach.  On  the 
other  hand,  the  rule  generally  laid  down  in  the  text-books  and  sup- 
ported by  a  majority  of  the  decisions  is  that  negotiable  instruments 

IT 8  Anson,  Cont.  p.  164. 

179  Barry  v.  Equitable  Life  Assur.  Soc,  59  N.  T.  587;  Loomis  v.  Ruck,  56 
N.  Y.  4Cj2;  Huguenim  v.  Baseley,  14  Ves.  273,  3  Lead.  Cas.  Eq.  94,  463;  Eadle 
V.  summon,  26  N.  Y.  9;  Gardner  v.  Gardner,  34  N.  Y.  155;  Voorhees  v.  Voor- 
hees,  39  N,  Y.  463;  Tyler  v.  Gardiner.  35  N.  Y.  559;  Kinne  v.  Johnson,  60 
Barb.  69;   Ferris  v.  Brush,  1  Edw.  Ch.  572;   Fry  v.  Fry,  7  Paige,  461. 

isoDuuiel.  iNeg.  Inst.  U  857,  858;    Tied.  Com.  Taper,  9  287. 


270  DEFENSES,  (Ch.  7 

executed  under  duress  are  voidable,  and  not  void,  and  hence  that 
the  defense  is  merely  personal,  and  not  available  against  an  inno- 
cent purchaser."^  Clearly,  if  the  cases  which  hold  that  a  bill  or 
note  stolen  from  the  maker  is  good  in  the  hands  of  an  innocent  pur- 
chaser are  correct,  an  instrument  executed  under  duress  should 
stand  upon  the  same  footing.  Under  the  Negotiable  Instruments 
Law,^*''  as  well  as  the  English  Bills  of  Exchange  Act,"*  duress  is 
a  personal  defense. 

111.  CONSIDERATION. — Any  consideration  which  will 
support  a  simple  contract  is  suf&cient  to  support  a  neg^o- 
tiable  bill  or  note,  or  the  transfer  or  indorsement  there- 
of."** 

In  case  of  negotiable  instruments  consideration  is  pre- 
sumed, but  this  presumption  may  be  rebutted. 

Text  writers  in  their  definitions  of  "consideration"  unite  in  quot- 
ing that  given  by  the  exchequer  chamber:^®*  "A  valuable  consid- 
eration iu  the  sense  of  law  may  consist  either  in  some  right,  inter- 
est, profit,  or  benefit  accruing  to  the  one  party,  or  some  forbear- 
ance, detriment,  loss,  or  responsibility  given,  suffered,  or  undertaken 
by  the  other."  ^**  And  this  declaration  of  Lush,  J.,  is  perhaps  the 
best  categorical  statement  of  the  subject  yet  made.  But  it  does 
not  explain  the  part  that  consideration  plays  in  the  general  theory 
of  contract.  And  therefore  we  purpose  to  explain  briefly  the  mean- 
ing of  consideration  and  what  its  necessary  elements  are,  and  then 
show  its  application  to  the  theory  of  bills  and  notes. 

181  Hogan  V.  Moore,  48  Ga.  156;  Ormes  v.  Beadel,  2  De  Gex,  F.  &  J.  333. 
In  DUNCAN  v.  SCOTT,  1  Camp.  100,  it  was  held  that,  where  the  defendant 
was  not  a  free  agent  when  he  drew  the  bill,  it  was  the  duty  of  the  plaintiff 
to  produce  evidence  of  consideration.  In  the  case  of  CLARK  v.  PEASE.  41  N, 
H.  414,  it  was  held  that,  where  duress  is  shown  in  the  making  or  in  tlie  circu- 
lation of  the  note,  there  is  imposed  upon  the  plaintiff  the  burden  of  showing 
that  he  is  a  bona  fide  holder  for  value. 

182  Section  94. 

183  Section  29,  subd.  2. 
18*  See  Neg.  Inst.  L.  §  51. 
isBCurrie  v.  Misa,  L.  R.  10  Exch.  153. 

180  Com.  Dig.  "Action  on  the  Case,"  bk.  1,  p.  15. 


§111)  REAL    AND    PERSONAL    DEFENSES.  271 

Consideration  is  the  accepted  evidence  of  tlie  fact  that  the  par- 
ties to  a  contract  intend  to  enter  into  a  binding  legal  obligation. 
In  examining  all  contracts  the  courts  first  ask  themselves  whether 
there  was  a  mutually  communicated  intention  common  between 
the  parties  to  act  or  forbear  towards  one  another,  and  if  they  find 
there  was,  then  they  ask  whether  the  agreement  made  between  the 
parties  was  such  that  it  must  be  enforced.  And  the  other  terms, 
elements,  and  conditions  of  the  agreement  being  according  to  law, 
the  test  whether  it  is  a  binding  legal  obligation  and  one  to  be  en- 
forced turns  upon  the  question  whether  or  not  there  was  present 
a  legal  consideration.  The  consideration,  in  law,  therefore,  is  the 
reason  for  making  the  contract.  If  it  is  present  the  courts  assume 
that  the  parties  intended  to  enter  into  a  legal  obligation;  if  absent, 
then,  although  there  may  have  been  a  promise  or  meeting  of  the 
minds,  yet  there  is  no  legal  reason  why  this  promise  should  not  be 
retracted  or  this  consensus  revoked,  because  neither  party  has  lost 
or  gained  anything  of  substantial  value.  The  agreement  is  too 
frivolous  for  courts  to  consider,  and  is  said  to  be  "nudum  pactum  ex 
quo  non  oritur  actio." 

The  first  element  of  a  consideration  is  that  it  must  have  value. 
According  to  Sir  William  Anson,^^^  the  matter  of  a  legal  obliga- 
tion must  possess  or  must  be  reducible  to  a  pecuniary  value.  This 
merely  means  that  there  must  be  some  ascertainable  quid  pro  quo. 
Mr.  Langdell,  in  his  summary  of  the  law  of  contracts,  shows  the 
evolution  of  the  theory  of  consideration  from  the  exact  quid  pro 
quo  necessary  to  create  a  debt  to  the  varieties  of  consideration 
stated  in  the  definition  of  Lush,  J.,  which  are  sufficient  to  support 
an  assumpsit.  There  it  appears  that  the  doctrine  of  consideration 
originated  in  the  action  of  debt,  which  originally  was  an  action  to 
recover  an  exact  sum  of  money  loaned  belonging  to  the  creditor, 
but  in  fact  in  the  possession  of  the  debtor.  The  right  was  in  the 
creditor  to  recover  of  the  debtor  the  possession  of  his  money  which 
the  debtor  thus  held.  From  these  rudimentary  notions  the  idea 
of  consideration  as  a  ba.sis  of  the  action  of  debt  was  developed 
through  various  stages  until  it  reached  the  point  that  the  consider- 
ation of  contracts  of  debt  required  (1)  that  the  consideration  given 
or  done  should  be  given  or  done  to  the  obligor  directly,  (2)  and  for 

i«T  Anson,  Cont.  pp.  6,  7;    PolL  Cont  p.  3. 


272  DEFENSM.  (Ch.  7 

him  directly;  (3)  that  it  should  be  received  by  the  obligor  as  the 
full  equivalent  for  the  obligation  assumed,  and  (4)  be  actually  exe- 
cuted. But  at  all  times  the  contract  which  was  the  basis  of  debt 
required  that  there  be  an  exact  quid  pro  quo  between  its  parties. 
And  in  case  of  debt,  unless  all  these  elements  of  consideration  were 
present,  the  creditor  or  obligee  could  not  have  his  remedy  in  an 
action  of  debt,  because  all  of  these  considerations  were  of  the  essence 
of  debt.  By  the  statute  of  Edw.  I.,^*'  the  action  of  assumpsit  was 
created  to  reach  that  large  class  of  cases  which  were  not  debts,  but 
yet  were  analogous  to  them.  These  were  seen  to  be  a  class  of 
rights  which  were  evidently  rights  based  upon  some  sort  of  an  agree- 
ment, which,  however,  was  not  in  its  turn  based  upon  a  consider- 
ation complying  with  all  the  requisites  we  have  stated.  The  con- 
tract had  not  a  consideration  sufficient  for  it  to  support  an  action 
of  debt  By  the  later  rules  the  agreements  for  which  assumpsit  lay 
need  not  have  an  exact  quid  pro  quo,  but  there  was,  nevertheless^ 
required  some  exchange  of  values  in  it  for  the  agreement  to  be 
binding  in  law,  or  so  that  it  could  be  enforced  by  courts  in  assumpsit. 
Hence  the  doctrine  of  consideration  sufficient  to  support  an  assump- 
sit was  developed  into  its  present  stage,  its  necessary  elements  be- 
ing those  stated  in  the  definition  of  Lush,  J.,  already  given.  And 
thus  we  find  that  the  courts  have  held  a  sufficient  consideration  to 
be  a  cross  acceptance,^^"  or  the  forbearance  of  the  debt  of  a  third 
person,^""  or  the  compromise  of  a  disputed  liability,^®^  or  a  promise 
to  give  up  a  bill  thought  to  be  invalid,^'*  or  a  debt  barred  by  the 
statute  of  limitations,^®^   or  a  debt  discharged   in  bankruptcy.^®* 

188 13  Edw.  I,  c,  24. 

189  Rose  V.  Sims,  1  Barn.  &  Adol.  526, 

i»o  Balfour  v.  Sea  Fire  Life  Assur.  Co.,  3  C.  B.  (N.  S.)  300;  Meltzer  v.  Doll, 
91  N.  Y.  3G5. 

iBi  Cook  V.  Wright.  30  Law  J.  Q.  B.  321. 

i»2  SMITH  V.  SMllTI,  13  C.  B.  (N.  S.)  418. 

183  LA  TOUCHE  V.  LA  TOUCHE,  3  Hurl.  &  C.  576  (It  was  held  in  this  case 
that  a  promissory  note  given  by  a  married  woman  as  a  sectirity  for  advances 
made  to  her  husband,  and  which  in  equity  binds  her  separate  estate,  Is  a  good 
consideration  for  another  promissory  note  given  by  her  after  her  husband's 
death  for  a  balance  then  due,  although  the  former  note  is  barred  by  the 
statute  of  limitations);  Wilton  v.  Eaton,  127  Mass.  174. 

i»4  Trueman  v.  Fenton,  Covpp.  544. 


§  111)  REAL    AND    PERSONAL   DEFENSES.  275 

The  courts,  on  the  other  hand,  have  held  insufficient  considerations 
to  be  a  mere  moral  obligation,^^*  or  a  debt  represented  to  be  due, 
though  not  really  due,^^^  or  the  giving  up  a  void  note,^®^  or  a  volun- 
tary gift  of  money.^®*  And  the  distinction  between  these  cases  rests 
upon  whether  the  different  considerations  are  or  are  not  of  any  actual 
value.^®" 

If  there  is  actual  value  it  will  suffice,  irrespective  of  the  fact  of 
its  adequacy.  The  courts  do  not  sit  to  make  bargains  for  the  par- 
ties. Their  only  inquiry  is  whether  one  has  been  made.  And 
whether,  therefore,  the  party  making  the  bargain  has  gained  or  lost 
by  it  is  immaterial,  so  far  as  its  legality  as  an  obligation  is  con- 
cerned.^"" And  the  rule  is  well  settled  that  the  consideration  need 
not  be  adequate,  though  it  must  be  of  value.  But  there  is  the  dis- 
tinction ^°^  made  between  a  valuable  consideration  other  than  money 
and  a  money  consideration.  With  a  valuable  consideration  other 
than  money,  the  slightest  consideration  will  support  a  promise  to 
pay  the  largest  amount  to  the  full  extent  of  the  promise,  while  with 
a  money  consideration  the  consideration  will  support  a  promise  to 
pay  money  only  to  the  extent  of  the  money  forming  the  consider- 
ation. The  law  is  deemed  to  leave  the  measure  of  the  value  of  a 
valuable  consideration  other  than  money  for  a  promise  to  pay  money 
to  the  parties  to  the  contract;    but  money,  being  the  standard  of 

»»8  Eastwood  V.  Kenyon,  11  Adol.  &  El.  43a 

18  8  Southall  V.  Rigg,  11  C.  B.  481. 

107  Coward  v.  Hughes,  1  Kay  &  J.  443. 

198  Hill  V.  Wilson,  L.  R.  8  Ch.  App.  894. 

198  Prof.  Ames  maintains  that  a  bill  or  note,  even  between  the  original 
parties,  is  valid  without  consideration,  and  that  the  contrary  notion  "is 
erroneous  upon  principle,  and  also  upon  the  authorities;  for,  although  It  must 
be  conceded  that  the  courts  have  sanctioned  the  defense  of  absence  of  con- 
sideration In  certain  cases  [where  a  bill  or  note  Is  executed  as  a  gift.— post, 
p.  'JT.S,  note  211].  these  decisions  should  be  regarded  as  anomalous  exociitions  to 
file  rule  tliat  a  bill,  ijeing  in  the  nature  of  a  si>ecialty,  is  obligatory  wiiliout  con- 
sideration, rather  than  as  Illustrations  of  the  opposite  doctrine  tliat  a  bill, 
being  a  simple  contract,  requires  consideration  to  support  It."  His  classifica- 
tion of  the  authorities  In  support  of  this  position  should  be  consulted.  '2  Ames. 
Cas.  Bills  &  N.  876. 

200  Pilkington  v.  Scott,  ir>  Mees.  &  W.  000;  Bainbrldge  v.  Firmstonr.  8 
Adol.  &  E.  743;   Darrow  v.  Wallter,  48  N.  Y.  Super.  Ct.  G. 

201  SAWYER  V.  McLOUTH,  46  Barb.  (N.  Y.)  350;  Johns.  Cas.  BlUa  &  N.  170. 

NEG.BILLS.— 18 


274  DEFENSES.  iCh.  7 

value,  is  not  subject  to  be  chauged  by  contract,  and  will  support  a 
promise  to  pay  money  only  to  the  amount  of  the  consideration. 

Consideration  is  also  classified  as  to  the  time  at  which  it  is  given, 
as  executory,  executed,  and  past.  An  executory  consideration  is 
somethiug  to  be  given  or  done  in  the  future;  an  executed  consider- 
ation is  some  act  or  forbearance  done  at  the  time  of  making  the  con- 
tract; ^^^  and  a  past  consideration  is  one  fully  performed  before 
the  agreement  or  transaction  which  is  the  basis  of  the  contract  rela- 
tion sought  to  be  created  has  come  into  existence.  The  two  former 
satisfy  the  test  of  a  consideration  that  it  be  sufficient  to  create  a 
legal  obligation.  Each  of  them  is  a  sufficient  legal  reason  for  sup- 
porting a  contract  relation.  But  the  third  does  not  satisfy  that  test. 
Whatever  the  transaction  constituting  the  past  consideration  may 
have  been,  it  is  no  part  of  the  transaction  upon  which  the  contract 
is  based.  There  may  have  been  some  moral  obligation  created  by 
it.  It  may  have  been  the  motive  for  making  the  new  contract,  liut 
neither  of  these  cases  has  the  pecuniary  value  which  is  required  for 
a  consideration,  and  neither  can  be  treated  as  a  consideration  suffi- 
cient to  support  a  new  contract,^°^  although  it  may  be  their  out- 
growth. A  past  consideration  is  therefore  to  be  rejected  from  con- 
siderations sufficient  to  support  contracts, — a  fact  to  be  kept  in  mind 
in  the  examination  of  the  question  commonly  known  as  the  theory 
of  the  antecedent  indebtedness,  hereinafter  discussed.^'"* 

Presumption  of  Consideration. 

Before  taking  up  the  phases  of  want,  failure,  or  illegality  of  con- 
sideration, so  common  in  cases  of  bills  and  notes,  it  remains  to 
speak  briefly  of  the  meaning  of  that  common  phrase  that  with  nego- 
tiable instruments,  in  the  first  instance,  consideration  is  pre- 
sumed.^" "^     This  relates  to  controversies  between  immediate  parties, 

202  Leake,  Cont  181. 

203  Lawson,  Cont.  §  100;   Anson,  Cont.  pp.  77-81;   Clark,  Cont.  §§  84-90. 

204  See  page  310,  post 

206  Whether  this  presumption  applies  to  non-negotiable  promissory  notes  is 
u  question  upon  which  the  cases  differ,  and  is  affected  by  statute.  Daniel, 
Neg.  Inst.  §§  1G2,  1G3.  It  was  held  not  to  prevail  in  BRISTOL  v.  WARNER, 
19  Conn.  7.  CARNWRIGHT  v.  GRAY.  127  N.  Y.  92,  27  N.  E.  835  (under  1 
Rev.  St.  768,  repealed  by  Neg.  Inst.  L.  §  320),  contra.  Neg.  Inst.  L.  §  50,  pro- 
vides that  "every  negotiable  instrument  is  deemed  prima  facie  to  have  been 


^111)  REAL    AND    PERSONAL    DEFENSES.  275 

and  means  that  the  instrument  itself  is  prima  facie  evidence  of  con- 
sideration sufficient  to  sustain  the  plaintiff's  case.^"^  But  where  the 
issue  between  immediate  parties  specifically  pleaded  is  want  of  con- 
sideration, and  the  defendant  introduces  evidence  in  rebuttal  of  the 
presumption,  the  burden  of  evidence  is  on  the  plaintiff,  and  it  re- 
mains for  him  to  satisfy  the  ]urj  that  there  was  a  consideration 
by  preponderance  of  evidence.^"''  The  fact  that  a  consideration  has 
been  given  is  stated  in  the  instrument,  and  that  the  instrument  is 
in  writing  does  not  exclude  oral  evidence  concerning  the  consider- 
-ation.  And  if  the  instrument  was  without  consideration  in  fact, 
although  it  is  stated  on  its  face  to  have  been  given  for  a  consider- 
ation, this  may  be  shown  by  extrinsic  testimony  ^'^^  when  the  issue 
is  as  to  the  consideration.  It  seems  to  have  been  the  early  doctrine 
that,  in  order  to  enable  the  defendant  to  put  the  plaintiff  on  proof 
of  consideration,  he  must  give  the  plaintiff  notice.  But  it  is  the  rule 
of  practice  at  present  that  a  notice  to  prove  consideration  is  unnec- 
essary, and  it  is  not  now  given.  An  allegation  in  the  answer  that 
the  note  is  without  consideration  is  sufficient.  At  present  the  plain- 
tiff makes  out  his  prima  facie  case;  the  defendant  then  gives  evi- 
dence in  dispute  of  the  consideration, — whereupon  the  plaintiff  calls 
his  witnesses  in  rebuttal  of  this,  to  prove  it.^°" 

issued  for  a  valuable  consideration,"  etc.  Section  320  defines  "a  negotiable 
promissory  note"  as  "an  unconditional  promise  *  ♦  *  to  pay  *  *  ♦  a 
sum  certain  in  money  to  order  or  bearer."  In  tbe  English  Bills  of  Exchange 
Act,  on  the  other  band,  In  the  definition  of  a  "promissory  note"  (section  83), 
the  words  are,  "to,  or  to  the  order  of,  a  specified  person  or  to  bearer."  It  Is 
not  essential  that  the  instrument  should  recite  that  it  Is  for  value  received. 
Emery  v.  Bartlett,  2  Ld.  Raym.  1556;  Franklin  v.  March,  6  N.  H.  304;  MEHL- 
BERG  V.  TISHER,  24  Wis.  607.    See  Neg.  Inst.  L.  §  25.    Ante,  p.    73. 

206  CARNWRIGHT  v.  GRAY,  127  N.  Y.  92,  27  N.  E.  835.  A  general  denial 
\s  insufficient  to  raise  the  issue  of  consideration.  Sprague  v.  Sprague,  80  Hun, 
285,  30  N.   Y.   Supp.   162. 

207  Bruyn  v.  Russell,  60  Hun,  280,  14  N.  Y.  Supp.  591;  Tcrley  v.  Perley, 
144  Mass.  104,  10  N.  E.  726;  Simpson  v.  Davis,  119  Mass.  269;  Delano  v. 
Bartlett,  6  Gush.  364;  Anthony  v.  Harrison,  14  Hun,  198.  But  possibly  a  con- 
trary doctrine  is  held  In  Bottum  v.  Scott,  11  N.  Y.  St  Rep.  614;  Ol'scu  t. 
Ensign.  7  Misc.  Rep.  (N.  Y.)  682,  28  N.  Y.  Supp.  38. 

208  Abb.  Tr.  Ev.  pp.  404,  405. 

«o»  See  Wood's  notes  to  Byles.  Bills  &  N.  pp.  121,  122. 


276  DEFENSES.  (Ch.  7 

112.  Defenses  interposed  by  reason  of  some  defect  in  tli© 
consideration  are  usually  \nrant  or  failure  of  consideration, 
and  illegality  of  consideration,  where  it  does  not  avoid  the 
instrument. 

113.  As  between  immediate  parties,  a  partial  w^ant  or 
failure  of  consideration  is  a  defense  pro  tanto,  but  the 
part  alleged  to  have  failed  must  be  clearly  ascertained. 
But  these  are  not  defenses  to  an  action  brought  by  a  pur- 
chaser of  the  instrument  for  value  without  notice. 

114.  When  there  is  a  total  want  of  consideration  between 
immediate  parties,  or  the  consideration  of  the  note,  though 
good  in  the  first  instance,  entirely  fails,  this  is  a  defense 
between  immediate  parties.  But  these  are  not  defenses 
to  an  action  brought  by  a  purchaser  of  the  instrument  for 
value  w^ithout  notice. 

In  the  preceding  section,  in  attempting  to  outline  the  funda- 
mental theory  underlying  that  very  large  branch  of  the  subject 
of  negotiable  instruments, — consideration, — we  endeavored  to  show 
that  the  rule  was  that  the  first  test  of  a  legal  consideration  was 
that  it  must  have  substantial  value,  and  that  if  there  was  substan- 
tial value,  and  an  agreement,  then  there  was  a  legal  contract.  Froro 
this  it  naturally  follows  that  the  converse  of  this  rule  is  also  true, 
and  that  if  there  is  not  a  consideration  to  support  the  contract,  or 
if  there  is  what  seems  to  be,  but  in  fact  is  not,  a  consideration, 
then  the  contract  itself  fails,  and  the  contract  will  not  be  enforced 
by  the  courts.  The  doctrines  of  want  or  failure  of  consideration 
divide  themselves  into  the  questions  arising  from  total  want  or 
failure  of  consideration,  partial  want  or  failure  of  considera- 
tion, and  the  comparative  equities  of  the  rights  of  immediate  parties 
and  of  the  bona  fide  holder.  The  doctrine  of  failure  or  want  of 
consideration  is  to  be  scrutinized  to  distinguish  between  failure  of 
consideration  and  inadequacy  of  consideration;  between  whole 
and  partial  failure  of  consideration;  and  between  definite  and  indefi- 
nite want  or  failure  of  consideration.  And,  while  it  cannot  be  said 
that  these  positions  are  fully  settled  by  authority,  the  general  doc- 
ti'ines  of  the  cases  classify  the  rules  relating  to  want  or  failure  of 
consideration  as  follows: 


|§  112-114)  REAL    AND    PERSONAL    DEFENSES.  277 

(1)  Total  failure  or  want  of  consideration  is  a  defense  in  an  action 
between  immediate  parties. 

(2)  In  case  of  a  pecuniary  consideration  or  of  property  having  an 
agreed  pecuniary  standard,  failure  of  a  definite  part  of  the  con- 
fiideration  is  d  defense  pro  tanto  between  immediate  parties. 

(3)  In  case  of  partial  failure  of  an  unliquidated  consideration,  re- 
coupment or  counterclaim  may  be  allowed, 

(4)  A  want  of  a  defined  part  of  a  consideration  is  a  defense  pro 
tanto. 

(5)  Defenses  of  total  or  partial  failure  or  want  of  consideration  do 
not  avail  against  the  purchaser  for  value  without  notice. 

FailuvV  or  vart  of  consideration  is  not  the  same  thing  as  its  in- 
adequac,<r.  Inadecjiuacy  means  that  where  values  are  exchanged 
one  value  does  not  equa^  the  other;  failure  of  consideration  means  a 
diminution  of  value  from  that  expressly  or  impliedly  agreed  to  be 
the  values  exchanged  in  transfer;  and  want  of  consideration  means 
no  value  at  all  given  for  value  received.  In  the  transfer  of  property 
the  fact  that  the  property  was  not  worth  what  it  was  supposed  to 
be,  if  there  is  no  fraud,  is  no  defense  in  an  action  for  the  purchase 
price.  And  when  the  question  is  one  of  adequacy,  courts  will  not 
inquire  into  the  actual  pecuniary  value  of  a  consideration,  but  will 
leave  the  parties  to  such  estimates  thereof  as  they  have  formed  in 
making  their  contract.  A  party  will  not  be  allowed  to  interpose  as 
a  defense  the  fact  that  the  property  was  not  pecuniarily  worth  what 
he  supposed  it  to  be,  or  that  he  has  received  no  actual  benefit  from 
it,  or  that  the  other  party  derives  greater  benefit  from  the  con- 
sideration than  he  does.  And  inadequacy  is  distinguished  from  fail- 
ure or  want  of  consideration  in  that  at  the  time  of  making  the  bill 
or  note  no  part  of  the  consideration  was  wanting,  or  that  no  part  of 
it  had  subsequently  failed.  It  was  complete  on  making  the  con- 
tract, and  had  changed  in  no  respect  at  the  time  of  bringing  the 
action.  The  amount  agreed  to  be  paid  in  the  bill  or  note  was  the 
value  set  by  the  parties  upon  the  consideration-  itself,  and  courts 
do  not  sit  to  change  this  and  to  make  contracts,  but  only  to  enforce 
those  the  parties  have  already  made.^^" 

110  WORTH  V.  CARE,  42  N.  Y.  ?,r,2;  Earl  v.  Peck.  64  N.  Y.  .WO;  Tinnier 
nr.  SUlway,  124  N.  Y.  538,  2^  N.  E.  25U;   Anson,  ConL  G3;   SLadwell  v.  iShudwell, 


278  DEFENSES.  (Ch.  7 

Except,  then,  where  mone}'  is  \n\\d  for  a  bill  or  note,  any  other 
valuable  thing  will  sufiQce  as  a  reason  for  the  enforcement  of  the- 
instrument.  In  such  cases  as  a  voluntary  gift  of  a  note;^^^  or  its 
indorsement  as  a  gift;^^'^  or  where  a  plaintiff  and  defendant,  a& 
executors  of  an  estate,  exchanged  notes  with  the  intent  of  assuring 
payment  against  each  other  in  an  impending  arbitration,  and  it  was 
sought  to  construe  these  notes  as  promises  which  charge  them  per- 
sonally;^^' or  where  two  persons  gave  notes  contingent  upon  the 
fact  that,  if  they  were  paid  in  the  future,  the  payee  would  convey  to- 
him  certain  lands,  which  in  fact  were  never  conveyed, — in  all  such 
cases,  we  say,  there  is  no  consideration  for  the  promise.  In  them 
the  promise  is  a  nudum  pactum.  The  courts  will  not  compel  parties 
to  pay  money  to  a  party  from  whom  they,  in  turn,  had  received  noth- 
ing. Hence  the  entire  want  of  consideration  between  immediate 
parties  destroys  all  remedy  upon  the  bill  or  note,  because,  as  be- 
tween immediate  parties,  the  negotiable  instrument  is  governed  in 
this  respect  by  the  general  rules  of  contract  law. 

These  reasons,  however,  do  not  apjily  where  the  consideration  has 
changed  in  whole  or  in  part  from  that  in  contemplation  of  the  par- 
ties at  the  time  of  making  the  contract.  Its  change  may  have  ren- 
dered it  either  totally  or  partially  worthless.     In  case  of  partial 

9  C.  B.  (N.  S.)  159;  Lindell  v.  Rokes,  60  Mo.  249;  Trickey  v.  Lame,  6  Mees.  & 
W.  278;   Tye  v.  Gwynne,  2  Camp.  346. 

211  Pearson  v.  Pearson,  7  Johns.  26.  A  gift  of  the  donor's  own  note  or  bill 
Is  not  valid  either  as  a  gift  inter  vivos  or  as  donatio  mortis  causa.  HOLLIDAY 
V,  ATKINSON,  5  Bam.  &  C.  501;  Harris  v.  Clark,  3  N.  Y.  93;  RAYMOND  v. 
SELLICK.  10  Conn.  480;  Warren  v.  Durfee,  126  Mass.  338;  SHAW  v, 
CAMP,  IC.O  111.  425,  43  N.  E.  608;  Tracy  v.  Alvord,  118  Cal.  654,  50  Pae.  757. 
But  a  man  may  make  a  valid  gift  of  a  bill  or  note  made  by  a  third  person, 
and  the  property  will  pass,  although,  for  lack  of  consideration,  the  donor  will 
not  be  liable  as  indorser.  Easton  v.'  Pratchett,  1  Cromp.,  M.  &  R.  808.  The 
holder  may  make  a  valid  gift  as  donatio  mortis  caosa,  nor  need  the  instrument 
be  indorsed.  RANKIN  v.  WEGUELIN,  27  Beav.  309;  Grover  v.  Grover,  24 
Pick.  (Mass.)  264;  Jones  v.  Deyer,  16  Ala.  226;  Stephenson  v.  King.  81  Ky.  42.^. 
In  such  case  the  donee  may  recover  against  the  prior  parties,  although  not 
against  the  donor  or  his  representatives  upon  the  indorsement.  Weston  v, 
Hight,  17  Me.  287.  As  to  donatio  mortis  causa,  see  Rand.  Com.  Paper,  §§  454, 
805-810;    Daniel,  Neg.  Inst.  §§  24-26a. 

»i2  Sehoonmaker  v.  Roosa,  17  Johns.  301. 

«"  Winter  v.  Livingston,  13  Johns.  54.     See  preceding  note. 


§§  112-114)  REAL    AND    PERSONAL    DEFENSES.  279 

wortlilessness,  the  worthless  part  may  be  a  clearly  defined  part  of 
the  whole,  or  be  indissolubly  bound  up  with  it.  ^Ind  these  aspects 
of  failure  of  consideration,  when  complicated  with  the  various  dif- 
ferent systems  of  the  administration  of  remedies,  have  presented 
problems  of  some  diflSculty  for  the  courts  to  decide,  and  this  difiS- 
culty  has  resulted  in  some  confusion  in  the  decisions  of  various 
jurisdictions.  The  rules  are  the  same  whether  the  consideration 
which  fails  be  executed  or  executory.  Examples  of  an  executed  con- 
sideration which  has  failed  are  property  for  which  a  note  has  been 
given,  but  which  has  been  taken  in  execution, ^^*  or  notes  given  for 
insurance  premiums  upon  the  policy  of  a  company  which  has  no 
legal  right  to  insure. '^^'^  In  both  of  these  cases  it  was  held  that 
there  was  a  total  failure  of  consideration,  and  that,  as  between  im- 
mediate parties,  it  was  a  sufficient  defense.^^'  The  availability  of 
this  as  a  defense,  however,  seems  to  depend  upon  two  alternatives. 
The  transaction  either  must  be  at  once  rescinded,  the  consideration 

214  CHENAULT  v.  BUSH,  84  Ky.  528.  2  S.  W.  160. 

216  Barbor  v.  Boehm,  21  Neb.  450,  32  N.  W.  221. 

2i«  Lightbody  v.  Ontario  Bank,  11  Wend.  (N.  Y.)  9.  This  was  a  case  whe>e 
bank  bills  were  received  in  payment,  and  the  bank  issuing  the  bills  had  stopped 
payment  at  the  time  when  the  bills  were  so  received,  but  the  fact  of  the 
bank's  failure  was  not  then  known  to  the  parties.  In  his  decision.  Savage, 
C.  J.,  said:  "The  question  is  which  of  these  parties  shall  sustain  the  loss 
which  has  happened  in  this  case.  •  •  *  In  the  case  of  the  payment  of  a 
counterfeit  or  forged  bill.  It  Is  settled  that  the  debtor  is  not  discharged,  and 
It  is  not  perceived  why  the  same  principle  should  not  prevail  where  the  pay- 
ment is  made  in  the  bill  of  a  bank  which  has  stopped  payment.  In  each  case 
the  debtor  parts  with  that  which  has  no  value,  and  the  creditor  does  not  re- 
ceive value  for  his  debt."  In  the  case  of  CAMIDGE  v.  ALLENBY,  6  Barn.  St. 
C.  373,  9  Dowl.  &  R.  391,  it  appeared  that  a  vendee  delivered  to  the  vendor.  In 
payment  for  goods,  promissory  notes  on  the  bank  of  D.  &,  Co.  This  occurred 
at  3  o'clock  in  the  afternoon,  and  D.  &  Co.  stopped  payment  at  11  o'clock  In 
the  forenoon  of  the  same  day  (December  10th).  The  vendor  never  presented 
the  bills,  but  on  December  17th  he  required  the  vendee  to  take  back  the  notes, 
and  pay  him  the  amount  This  was  refused,  and  on  trial  it  was  held  that  the 
vendor  was  guilty  of  laches,  and  had  thereby  made  tlie  notes  his  own,  and 
consequently  that  they  operated  as  a  satisfaction  of  the  debt.  In  the  case  of 
BAYARD  V.  SHUNK,  1  Watts  &  S.  (Pa.)  92,  It  waa  held  that  the  debt  was  dis- 
charged by  a  payment  in  bank  notes,  though  the  bank  had  provluiisly  failed, 
both  parties  being  ignorant  of  the  fact 


280  DEFENSES.  (Ch.   7 

ret'.irned,  and  the  parties  placed  as  nearly  as  may  be  in  statu  quo,-'^ 
or  else  the  consideration  must  be  proved  to  be  completely  worthless, 
for  otherwise,  if  the  consideration  be  retained,  the  question  is  some- 
times treated  as  one  of  inadequacy,  and  the  obligation  may  be 
deemed  binding.^^'  Cases  of  executory  consideration  are  where  the 
purchaser  of  a  patent  gave  his  note  for  it  and  the  patent  subse- 
quently proved  void,^^'  or  where  a  vendee  bought  goods  of  a  cer- 
tain kind  which  the  vendee  failed  to  deliver.^^"  In  such  cases  the 
rules  are  also  either  that  there  must  be  instant  rejection  of  the 
goods  after  an  opportunity  to  examine  them,  or  else  the  goods  must 
be  shown  to  have  been  valueless.  Of  course,  if  there  was  involved 
in  the  facts  of  the  case  a  breach  of  warranty  which  survives  the 
acceptance  of  the  goods,  it  lays  the  basis  for  a  cross  action  or  coun- 
terclaim, and  is  an  exception  to  the  principle  stated.*^*  It  is  the 
better  rule  in  case  of  executory  considerations  that,  as  between  im- 
mediate parties,  a  partial  performance  of  the  consideration  allowj^ 
only  a  recovery  for  the  part  performed  upon  the  bill  or  note  given 
for  the  consideration  itself,^^^  though  this  rule  is  disputed  by  many 
cases.'^^'  This  conflict  of  authorities  is  due  not  so  much  perhaps  to 
the  actual  merits  of  the  question  as  to  rules  of  practice  arising 
upon  questions  of  recoupment,  offset,  cross  demand,  and  counter- 
claim, and  whether  these  remedies  may  be  administered  in  the 
action  in  which  recovery  upon  the  bill  or  note  is  sought  But  these 
questions  are  happily  becoming  obsolete  as  state  after  state  substi- 
tutes the  civil  action  and  code  procedure  for  the  common-law  action 
and  equity  suit.  The  provision  of  the  Codes  that  a  defendant  may 
avail  himself  of  any  defense  which  tends  to  defeat  or  diminish  the 

217  Burton  v.  Stewart,  3  Wend.  236;  Lewis  v.  Cosgrrave,  2  Taunt.  2;  Leg- 
gett  V.  Cooper,  2  Starkie,  103;    Fisher  v.  Samuda,  1  Camp.  191. 

218  Burton  v.  Stewart,  3  Wend,  23G;  Johnson  v.  Titus,  2  Hill,  608. 
21 »  Dickinson  v.  Hall,  14  Pick.  217. 

2  20  Wells  V.  Hopkins,  5  Mees.  &  W.  7. 

221  Norton  v.  Dreyfuss,  106  N.  Y.  91,  12  N.  E.  428;  Brigg  v.  Hilton,  99  N.  Y. 
517.  3  N.  E.  51;  Day  v.  Pool,  52  N.  Y.  416. 

222  Sawyer  v.  Chambers,  44  Barb.  43;  Union  Foundry  &  P.  C.  W.  Works  v. 
New  York  L,  D.  Co.,  13  N.  Y.  St.  Rep.  701;  Fisher  v.  Sharpe,  5  Daly,  214; 
Murphy  v.  Lippe,  35  N.  Y.  Super.  Ct.  542. 

223  Fletcher  v.  Chase,  16  N.  H.  38;  Stone  v.  Peake,  16  Vt  218;  Harrington 
V.  Lee,  32  Vt.    249;    Evans  v.  Williamson,  79  N.  C.  96. 


§§  112-114)  BEAL    AND    PERSONAL    DEFENSES.  281 

plaintiff's  recovery  and  which  is  a  cause  of  action  arising  out  of  the 
contract  or  transaction  set  forth  in  the  complaint  as  the  foundation 
of  the  plaintiff's  claim  or  connected  with  the  subject  of  the  action, 
or  that  it  may  be  any  new  matter  constituting  a  defense,  it  is  hoped 
will  allow  the  establishment  of  a  rule  that  a  failure  of  a  part  of  the 
consideration,  if  definite,  will  allow  a  recovery  pro  tanto;  if  indefi- 
nite, a  recoupment  of  damages.  Now,  however,  the  rules  seem  to 
be  somewhat  ill-defined,  but  as  nearly  as  may  be  stated  are  as  fol- 
lows: 

(1)  If  there  is  entire  failure  to  give  good  title  to  chattels  or  land 
it  is  a  defense;  ^-^  if  it  is  a  mere  defect  of  title  capable  of  ascertain- 
ment in  money,  and  the  loss  is  borne  by  the  purchaser,  it  is  a  defense 
pro  tanto;  ^^'^  if  it  is  a  defect  in  which  the  loss  is  not  borne  by  the 
purchaser,  it  is  not  a  defense.^^' 

(2)  If  the  failure  is  of  part  of  a  money  consideration,  or  one  capa- 
ble of  definite  computation,  it  is  a  good  defense  pro  tanto.^''' 

(3)  If  the  failure  is  in  the  value  of  goods  delivered,  and  is  incapa- 
ble of  ascertainment,  it  is  no  defense,  being  in  the  nature  of  inade- 
quacy of  consideration,  as  already  shown.  But  if  this  failure  in 
value  is  a  distinct  part  of  the  consideration,  and  is  due  either  to  a 
failure  of  the  quality  or  the  quantity  of  the  goods,  it  is  a  defense 
pro  tanto.''*' 

22*  Rock  V.  Nichols,  3  Allen,  342;  Morrow  v.  Brown,  31  Ind.  378;  Peterson 
y.  Johnson,  22  Wis.  21;  Stewart  v.  Insall,  9  Tex.  397, 

«28  Doremus  v.  Bond,  8  Blaokf.  368;    Holman  v.  Creagmiles,  14  Ind.  177. 
228  Bringham  v.  Ligbley,  61  Ind.  524. 

227  Byles,  Bills,  132;  Chit  Bills.  86;  1  Edw.  Bills  &  N.  469;  DARNELL  v. 
WILLIAMS,  2  Starkie,  166;  JEFFERIES  v.  AUSTIN.  Strange,  674;  GAMBLE 
V.  GRIMES,  2  Ind.  392;  Morgan  v.  Fallensteln,  27  111.  31;  Black  v.  Ridgway, 
131  Mass.  80. 

228  AGRA  &  MASTERMAN'S  BANK  v.  LEIGHTON,  L.  R.  2  Exch.  56.  It 
was  held  In  this  case  that,  in  an  action  by  the  indorsee  of  a  bill  of  exchange 
against  the  acceptor,  a  plea  stating  that  the  bill  was  given  for  goods  to  be 
supplied  by  the  drawer,  and  that  only  part  of  the  goods  were  supplied,  of 
which  the  defendant  accepted  a  part,  and  that  by  reason  of  the  noucompk'tlon 
of  the  contract  tlie  i)art  supplied  became  valucloss  to  him,  and  also  showing 
that  the  plaintiff  is  not  a  holder  for  value,  will  be  good.  And  see  Dunnent  v. 
Tuttle,  Johns.  Gas.  Bills  &  N.  178;  Hammett  v.  Barnard,  1  IIuu,  11)8.  Though 
see  cases  holding  no  defense  unless  there  was  a  warranty.  Welch  v.  Carter, 
1  Wend.  IS.');  Reed  v.  Prentiss,  1  N.  II.  174;  Bryant  v.  IViiiIkt,  45  Vt  487; 
Detrick  v.  McGlone,  46  Ind.  291;    Richards  v.  Botzer.  53  111.  466. 


282  DEFENSES.  (Ch.   7 

(4)  If  the  failure  of  consideration  arises  from  failure  to  perform 
an  agreement,  it  is  a  defense  pro  tanto.^^® 

These  reasons  apply  to  want  of  consideration,*'"  or  want  of  a 
defined  part  of  it.*^^  In  the  former  event  the  contract  is  unenforce- 
able; in  the  latter,  enforceable  only  pro  tanto.^^*  And  this  leaves 
us  to  consider  the  position  of  the  bona  fide  holder  when  confronted 
with  these  defenses  raised  against  him. 

The  purchaser  for  value  without  notice  purchases  uj)on  a  consid- 
eration an  order  or  promise  to  pay  money.  He  is  not  bound  in  any 
way  to  inquire  into  the  circumstances  which  gave  the  paper  birth. 
If,  for  example,  the  maker  defends  that  the  consideration  for  a 
note  is  a  contract  which  is  wholly  or  partly  unperformed,  and  the 
consideration  has  so  far  failed,  the  answer  is  that  the  maker  has 
issued  to  the  world  a  negotiable  promise  to  pay  money  absolutely 
in  consideration  of  the  promise  of  the  payee  to  do  some  act  for  his 
benefit  in  the  future.  That  the  payee  has  failed  to  do  this  is  no 
reason  why  the  bona  fide  holder  should  be  deprived  of  the  benefit 
of  the  makei*'s  promise,  which  he  has  bought.  He  has  taken  no  part 
in  the  delinquencies  of  the  payee,  and  they  therefore  cannot  be 
charged  against  him.  In  other  words,  his  equities  are  superior  ta 
those  of  the  maker,  w'ho  must  look  for  his  remedy  to  the  payee.^^^ 
And  so  in  the  other  cases  involving  want  or  failure  of  considera- 
tion, the  defenses  consist  of  personal  transactions  between  imme- 
diate parties,  in  which  the  bona  fide  holder  has  no  part,  and  with 
which  he  is  not  chargeable.  The  reasons  for  holding  accommoda- 
tion parties  have  been  already  explained.^^*  And  in  other  cases 
already  mentioned,  as  for  patents  proven  void,^'"*  or  for  the  pur- 

229  Watson  V.  Russell,  3  Best  &  S.  34;  Miller  v.  Wood,  23  Ark.  546;  Jef- 
fries V.  Lamb,  73  Ind.  202;  STACY  v.  KEMP,  97  Mass.  1G6.  See  Neg.  Inst. 
L.  §  54. 

230  Anthony  v.  Harrison,  14  Hun,  198. 
2  31  Seeley  v.  Engell,  13  N.  Y.  542. 

232  Aubert  v.  Maze,  2  Bos.  &  P.  373;  Forman  v.  Wright,  11  C.  B.  481;  PAR- 
ISH V.  STONE,  14  Pick.  (Mass.)  198. 

23 3  DAVIS  V.  McCREADY,  17  N.  Y.  230. 

234  See  supra,  p.  173. 

23B  Smith  V.  Hiscock.  14  Me.  449.  See  the  provision  of  the  New  York  Ne- 
gotiable Instnn^t■l)i^  l.;i\v.  §  330,  post,  p.  488,  as  to  negotiable  instruments 
given  for  patent  rights. 


§  115)  REAL    AND    PERSONAL    DEFENSES.  283 

chase  of  lands  to  which  the  title  fails,^^*  or  for  goods  purchased 
and  partly  delivered,^''  the  answer  is  the  same, — that  an  absolute 
promise  or  acceptance  to  pay  to  order  has  been  issued,  and  must  be 
lived  up  to,  when  in  the  hands  of  a  purchaser  who  has  bought  it 
in  reliance  upon  the  promise.  Neither  total  nor  partial  want  or 
failure  of  consideration  is  a  defense  against  a  bona  fide  purchaser 
for  value  without  notice.^^* 

115.  ILLEGAL  CONSIDERATION.  —  A  consideration 
may  be  rendered  illegal  by  statute,  or  by  the  rules  of 
common  law,  or  because  it  is  against  public  -welfare  ta 
treat  the  consideration  as  a  valid  legal  consideration.  An 
illegal  consideration,  -w^hether  total  or  partial,  renders  the 
instrument  unenforceable,  as  between  immediate  parties, 
but  it  is  not  in  general  a  defense  to  the  action  of  the  pur- 
chaser for  value  without  notice.^ 

A  brief  statement  of  that  broad  topic  of  the  general  law  of  con- 
tracts known  as  "illegal  consideration"  is  as  follows: 

Since  every  contract  is  but  an  agreement  enforceable  by  law,  to  be 
enforceable  it  must  be  for  some  object  which  the  law  can  recognize. 
The  law  refuses  to  recognize  rights  arising  out  of  three  general 
classes  of  subjects,  and  to  enforce  contracts  made  with  reference  ta 
them.      They  are: 

(1)  Those  prohibited  by  statute. 

(2)  Those  prohibited  by  express  rules  of  common  law  with  refer- 
ence to  objects  which  the  law  deems  evil  or  immoral. 

(3)  Those  which  contravene  public  policy. 

Statutory  Prohibition}*^ 

The  statutes  which  prohibit  considerations  and  render  them  ille- 
gal are  commonly  classified  as  follows: 

(1)  Those  which  forbid  a  transaction  constituting  a  consideration, 
and  declare  the  contract  growing  out  of  it  void. 

"«  VALLETT  V.  PARKER,  6  Wend.  (N.  Y.)  615. 
«8T  Baldwin  v.  Killlan,  63  111.  550. 

2U8  Robinson  v.  Reynolds,  2  Q.  B.  19G;    HOFFMAN  v.  BANK.  12  Wall.  181; 
QEUEHTEMATTE  v.  MORRIS,  4  N.  E.  1,  101  N.  Y.  03.     See  Neg.  lust.  L.  {  54. 
23"  Cf.  N<K.  Inst,  L.  §§  94-06. 
'♦f*  As  to  conflict  of  laws,  see  ante,  p.  183. 


284  DEFENSES.  (Ch.   7 

(2)  Those  which,  for  the  public  welfare,  attach  a  penalty  to  a 
transaction  constituting  a  consideration,  and  thus  by  implication 
forbid  the  making  of  any  contract  growing  out  of  it 

(3)  Those  which  declare  a  consideration  illegal,  but  do  not  say 
that  it  shall  avoid  the  contract. 

(4)  Those  which  attach  no  penalty  to  a  consideration,  but  which 
enact  that  the  consideration  is  illegal,  and  that  the  agreement  rest- 
ing upon  it  shall  not  be  enforced. 

(5)  Those  which  enjoin  certain  penalties,  conditions,  or  regula- 
tions upon  the  conduct  of  a  business  or  profession,  but  which  attach 
no  specific  penalty  to  any  specific  transaction.^*^ 

These  five  classes  of  statutes  are  in  turn  distinguished  as  those 
which  avoid  the  consideration,  either  by  express  declaration,  or  by 
imposing  a  penalty  upon  it,  and  those  which  merely  declare  the  con- 
sideration illegal.  The  important  difference  between  these  two 
classes  is  that,  as  already  shown,  the  former  is  a  defense  to  the  in- 
strument in  the  hands  of  a  bona  fide  holder,^*^  while  the  latter  is 
not.  The  statutes  of  the  latter  class,  however,  so  generally  out- 
number those  of  the  former,  that  it  may  be  said  to  be  the  rule  that 
the  title  of  an  innocent  holder  for  value  cannot  be  impeached  by 
any  illegality  in  the  transactions  between  prior  parties,^**  the  ex- 
ceptions being,  of  course,  where  the  statutes  expressly  forbid  the 
consideration  and  avoid  the  contract  growing  out  of  it,  or  where  the 
plain  intention  of  the  penalty  affixed  by  the  statute  to  the  trans- 
action is  to  forbid  it,  and  thus  the  contract  is  avoided.     The  reason 

«*i  Pol.  Cont.  pp.  254-261. 

2*2  See  siipia,  p.  234.     It  was  said  by  Christiancy,  J.,  in  PATON  v.  COLT, 

5  Mich.  505,  that  whenever  the  consideration  of  the  paper  between  the  orig- 
inal parties  has  been  illegal,  especially  If  in  violation  of  a  positive  prohi- 
bition of  statute,  proof  of  such  illegality  throws  upon  the  holder  the  burden 
of  proving  that  he  got  It  bona  fide,  and  gave  value  for  it.  To  the  same  effect, 
see  BAILEY  v.  BIDWELL,  13  Mees.  &  W.  73;  HARVEY  v.  TOWERS.  6 
Exch.  656;    Northam  v.  Latoiiche,  4  Car.  &  P.  140;    VALLETT  v.  PARKER. 

6  Woud.  (X.  Y.)  615:    Story,  Bills,  §  193. 

248  Thus,  in  POTTER  v.  TUBE,  1  Chit.  Jr.  Bills,  430,  which  was  an  action 
against  the  acceptor  of  a  bill,  by  the  payee.  It  was  held  that  the  fact  the  con- 
sideration for  the  acceptance  was  a  debt  due  to  the  drawer  by  the  acceptor 
for  smuggled  goods  was  no  defense  against  the  plaintiff,  unless  the  bill  were 
£iveu  him  for  a  smugghng  debt. 


§  115)  KEAL    AND    PERSONAL    DEFENSES.  285 

for  this  rule  is  the  one  so  general  in  cases  involving  consideration, 
that  when  one  of  tveo  innocent  persons  must  suffer  bj  the  acts  of  a 
third,  he  who  has  enabled  such  third  person  to  occasion  the  loss 
must  sustain  it.-**  It  is  true  that  the  innocent  maker  or  acceptor 
may  suffer  from  the  violation  of  a  statute  which  was  perhaps  meant 
to  protect  him.  Either  or  both  of  these  prior  parties  may  have  done 
something  forbidden,  and  the  court  in  enforcing  the  bill  or  note  may 
be  enforcing  a  violation  of  the  statutes,  yet  the  bona  fide  holder 
is  no  accessory  to  the  illegality,  nor  can  the  statute  be  used  to  shield 
the  wrongdoer.  The  transaction,  whatever  it  may  have  been,  was 
one  of  which  the  bona  fide  holder  knew  nothing,  and  in  which  he 
took  no  part.  The  only  thing  with  which  he  had  to  do  was  the  pur- 
chase of  a  promise  or  order  to  pay  money,  which  he  asks  the  court 
to  enforce.  And  the  courts  respond  to  his  suit  by  saying  to  the  prior 
parties  who  have  suffered  by  or  committed  the  illegality  that  their 
wrongs  must  be  settled  elsewhere  than  in  his  suit,^*"^  and  are  no 
answer  to  his  claim. 

The  statutes  which  declare  a  consideration  illegal  vary  widely  in 
their  topics  and  language  in  the  different  states.  Very  common  ex- 
amples are  a  bill  or  note  executed  on  Sunday,^*'  or  a  bill  or  note 
given  for  intoxicating  liquors.^*''  These  cases  are  but  examples  of 
the  general  principle,  whatever  be  the  wording  of  the  particular 
statute.  Thus,  from  the  New  York  point  of  view,  before  the  repeal 
of  the  Sabbath  observance  act,***  a  contract  made  on  Sunday  was 
not  void  at  common  law.**"  And  in  New  York  it  was  declared  to 
be  good  unless  it  was  in  contravention  of  some  express  statute  for- 
bidding it.*'°  The  statute  in  that  state  regulating  the  Sabbath  ob- 
servance was  meant  to  be  in  harmony  with  the  religion  of  the  state 

244  VALLETT  V.  PARKER,  6  Wend.  (N.  Y.)  615;  Willmarth  v.  Crawford, 
10  Wend.  (N.  Y.)  341. 

24B  City  Bank  r.  Barnard,  1  Hall,  80;  Gould  v.  Armstrong,  2  Hall,  2G5;  Hill 
v.  Northrup,  4  Thomp.  &  C.  120;   Grimes  v.  Hillenbrand,  6  Thomp.  &  C.  620. 

246  Saltmarsh  v.  Tuthlll,  13  Ala.  390;   VINTON  v.  PECK,  14  Mich.  287. 

24T  Cazet  V.  Field,  9  Gray,  329;  Norris  v.  Langley.  19  N.  H.  423;  PINDAR 
V.  BAIiLOW,  31  Vt.  529. 

248  r.aws  1886,   c.  593. 

249  A  bill  or  note  executed  on  Sunday  Is  not  Invalid  at  common  law.  Begble 
T.  Levi,  1  Cromp.  &  J.  180;   Murphy  v.  Collins.  121  Mass.  6. 

2  60  Boyuton  v.  Page,  13  Wend.  425;   Sayles  v.  Smith.  12  Wend.  67. 


28G  DEFENSES.  (Cll     7 

;ind  the  religious  sentiment  of  the  public,  and  for  the  sup])ort  and 
maintenance  of  public  morals  and  good  order.  Acts  which  did  not 
violate  the  purpose  of  this  statute,  and  did  not  disturb  and  hinder 
those  who  for  themselves  desired  to  enjoy  Sunday,  were  not  prohib- 
ited.-°^  Bargains  made  on  Sunday  were  enforceable.  And  it  is  to 
be  inferred  that  bills  and  notes  given  on  Sunday  were  good  unless 
they  were  for  something  prohibited  by  statute  to  be  done,  as  for 
the  enforcement  of  work  done  on  Sunday  exclusively.^"  So  that 
in  New  York,  although  there  is  little  express  authority  on  the  point, 
it  seems  safe  to  say  that  since  the  Sunday  laws  in  the  majority  of 
instances  would  probably  not  be  treated  as  defenses  to  actions  upon 
bills  and  notes  between  immediate  parties,  they  would  be  still  less 
apt  to  be  allowed  in  case  of  a  suit  by  the  bona  fide  holder.  In  other 
states,  as  between  immediate  parties,  the  question  turns  first  upon 
the  wording  and  interpretation  of  the  statute  itself.  If  the  statute 
expressly  prohibits  the  making  of  contracts  on  Sunday,  then  it  is 
a  defense  as  between  immediate  parties.  Again,  if  it  provides  that 
no  i)erson  shall  do  any  work,  labor,  or  business  on  Sunday,  then 
the  making  of  a  bill  or  note  is  the  making  of  a  contract,  is  secular 
business  within  the  meaning  of  the  statute,  and  is  a  defense  be- 
tween immediate  parties.  But  if  it  prohibits  only  servile  work,  or 
the  work,  labor,  or  business  of  a  person's  ordinary  calling,  then  the 
making  of  a  bill  or  note  is  not  within  the  prohibition  of  the  statute, 
and  the  statute  does  not  apply.^^'  Where,  however,  it  is  conceded 
that  the  statute  does,  apply  to  the  case  of  the  bill  or  note,  then  the 
question  becomes  one  of  the  delivery  of  the  instrument.  The  bill, 
note,  or  indorsement  is  not  executed  until  delivered. ^^*  And  though 
dated  or  signed  on  Sunday,*"^"*  it  has  no  life  as  a  contract  until  the 
day  of  its  delivery.  But  if  dated  and  signed  and  delivered  on  Sun- 
day, or  dated  and  signed  on  a  secular  day  and  delivered  on  Sunday,'"*' 

251  Smith  V.  Wilcox.  24  N.  Y.  354. 

2  52  Merritt  v.  Earle,  31  Barb.  38.  affirmed  29  N.  Y.  115;  Batsford  v.  Every, 
44  Barb.  G20;  McNamee  v.  McNamee.  9  N.  Y.  St.  Rep.  720;  Sun  Printing  & 
Pub.  Ass'n  V.  Tribune  Ass'n,  44  N.  Y.  Super.  Ct.  13G. 

2  S3  Clark,  Cont.  pp.  394,  395. 

25*  See  supra,  p.  67. 

25B  Conrad  v.  Kinzle,  105  Ind.  281.  4  N.  E.  863. 

268  Allen  V.  Deming,  14  N.  H.  133;  Bank  of  Cumberland  v.  Mayberry,  48 
Me.  19& 


§  115)  REAL    AND    PEliSONAL    DEFENSES.  287 

the  instrument  is  unenforceable  between  immediate  parties, ^"^  un- 
less the  party  prosecuting  it  shows  that  it  was  delivered  on  a  secular 
day.^°*  The  presumption  from  its  being  dated  on  Sunday  is  that 
it  was  delivered  on  that  day,  and  its  date  is  notice  to  all  parties 
of  its  delivery  on  Sunday,  and  its  invalidity.^''®  It  is  this  notice 
which  destroys  its  validity  in  the  hands  of  the  purchaser  for  value. 
For  if  the  instrument  is  dated  on  Sunday,  he  is  presumed  to  know 
it  was  delivered  on  that  day,  and  so  is  a  purchaser  with  notice. 
But,  on  the  other  hand,  if  the  contract  was  actually  made  on  Sun- 
day, but  there  is  no  legal  reason  for  charging  the  purchaser  for 
value  with  l^nowledge  of  this  fact,  then  the  illegality  of  the  con- 
tract is  no  defense  against  the  bona  fide  purchaser,  and  he  takes 
the  bill  or  note  free  from  equities. ^^°  Or  in  other  words,  to  apply 
the  tests  given,  the  Sunday  laws  are  in  general  of  that  class  which 
render  the  consideration  illegal,  not  void,  and  are  therefore  not  a 
defense  against  the  purchaser  for  value,  unless  he  has  notice  that 
the  bill  or  note  was  given  in  violation  of  the  statute.  These  tests 
apply  and  reasons  govern  in  the  application  of  the  statutes  which 
render  the  bill  or  note  unenforceable,  or  which  seek  to  regulate  the 
conduct  of  a  business  or  profession.  Examples  are  the  traffic  in 
intoxicating  liquors,^®^  or  statutes  requiring  lawyers,  physicians, 
and  surgeons  to  procure  a  license,  certificate,  or  diploma  as  a  con- 
dition precedent  to  the  right  to  practice  in  their  profession,  or  stat- 
utes regulating  dealings  in  articles  of  commerce.     These  statutes 

»ST  Bank  of  Cumberland  v.  Mayberry,  48  Me.  198;  Pope  v.  Linn,  50  Me. 
86;  STATE  CAPITAL  BANK  v.  THOMPSON,  42  N.  H.  370;  Ball  v.  Powers, 
62  Ga.  757;   Brimhall  v.  Van  Campen,  8  Minn.  13  (Gil.  1). 

258  DRAKE  V.  ROGERS,  32  Me.  524;  LOVEJOY  v.  WHIPPLE,  18  Vt.  379; 
Aldridge  v.  Branch  Bank,  17  Ala.  45;  Trieber  v.  Commercial  Bank,  31  Ark.  128. 

209  HILTON  V.  HOUGHTON,  35  Me.  143;  Winehell  v.  Carey,  115  Mass.  500; 
ClouRh  V.  Davis,  9  N.  H.  500;  KING  v.  FLEMING.  72  111.  21;  Cranson  v.  Goss, 
107  Mass.  439;    Sinclair  v.  Baggaley,  4  Mees.  &  W.  312. 

260  Pope  V.  Linn,  50  Me.  84;  STATE  CAPITAL  BANK  v.  THOMPSON,  42 
N.  H.  370;  Cranson  v.  Goss,  107  Mass.  439;  Greathead  v.  Walton,  40  Conn. 
226;  Ball  v.  Powers,  62  Ga.  757;  Trieber  v.  Commercial  Bank,  31  Ark.  12.S; 
Clinton  Nat.  Bank  v.  Graves,  48  Iowa,  228;   KNOX  v.  CLIFFORD,  38  Wis.  or.l. 

281  Cazet  V.  Field,  9  Gray,  .329;  Nonis  v.  Langley,  19  N.  II.  42.'?;  PINDAR 
V.  BARLOW,  31  Vt.  529.  Some  statutes,  however,  render  void  a  bill  or  note 
given  for  Intoxicating  liquors.  Strelt  t.  Sanborn,  47  Vt.  702;  Ilanuum  t. 
Richardson,  48  Vt.  508. 


288  DEFENSES.  (Ch.  7 

are  in  general  not  a  defense  to  negotiable  instruments  prosecuted 
by  the  bona  fide  holder. 

Common-Law  Prohihition. 

Evil  or  immoral  considerations  affecting  negotiable  instruments 
are  those  which  are  made  in  breach  of  the  well-settled  rules  of  the 
common  law.  Bills  and  notes  based  upon  them  are  either  instru- 
ments given  in  consideration  of  committing  a  crime  or  a  civil  wrong, 
or  else  instruments  given  upon  a  consideration  in  fraud  of  the  rights 
of  third  persons.  Instances  of  the  first  kind  are  orders  or  promises 
in  consideration  of  committing  a  trespass  likely  to  lead  to  a  breach 
of  the  peace,  as  an  assault  upon  a  third  person,^®^  or  of  printing  a 
libel,'"*  or  of  committing  a  civil  wrong  by  fraud  or  false  pre- 
tenses.'°*  Wherever  such  are  the  considerations  of  a  negotiable  in- 
strument, the  court  will  refuse  to  enforce  the  instrument,  as  between 
immediate  parties.  The  agreements  based  upon  a  consideration  in 
fraud  of  the  rights  of  third  persons  most  common  in  the  case  of 
negotiable  instruments  are  when  one  creditor  takes  a  bill  or  note 
for  some  advantage  to  himself  over  other  creditors  who  have  united 
with  him  in  a  composition  of  their  debts  against  some  common 
debtor.^®°  In  such  a  case  each  creditor  acted  on  the  faith  that  the 
engagement  made  with  the  others  would  be  binding  upon  them,  and 
each  had  the  undertaking  of  the  rest  as  a  consideration  for  his 
own  undertaking.  The  beneficial  consideration  to  each  creditor  was 
the  engagement  of  the  rest  to  forbear.  *^very  composition  deed,'^ 
says  Mr.  Justice  Duer,^^"  "is  in  its  spirit,  if  not  in  its  terms,  an  agree- 
ment between  the  creditors  themselves,  as  well  as  between  them 
and  the  debtor.  It  is  an  agreement  that  each  shall  receive  the  sum 
of  the  security  which  the  deed  stipulates  to  be  paid  and  given,  and 
nothing  more."  A  private  agreement,  evidenced  by  a  bill  or  note, 
therefore,  by  any  one  creditor,  to  receive  more  than  his  composite 
share,  is  a  fraud  upon  the  rest,  and  the  courts  will  not  enforce  it.^®^ 

282  Allen  V.  Rescous,  2  Lev.  174. 

268  Poplett  V.  Stockdale,  1  Ryan  &  M.  337;  Arnold  v.  CUCford,  2  Sumn,  238, 
Fed.  Cas.  No.  555;   Atkins  v.  Johnson,  43  Vt.  78. 

264  Materne  v.  Horwltz,  101  N.  Y.  470,  5  N.  B,  331;  Bloss  v.  Bloomer,  23 
Barb.  604;   Jerome  v.  Bigelow,  66  111.  452. 

268  White  V.  Kuntz.  107  N.  Y.  518,  14  N.  E.  423. 

266  Breck  v.  Cole,  4  Sandf.  79-83. 

««7  BUss  V.  Matteson,  45  N.  Y.  22. 


§  115)  REAL    AND    PERSONAL    DEFENSES.  289 

Contravention  of  Pvblic  Policy. 

The  commonest  cases  of  bills  and  notes  given  in  contravention  of 
public  policy  are  those  based  upon  considerations  tending  either  to 
injure  the  public  service,  or  obstruct  the  public  justice,  or  else  based 
upon  considerations  in  restraint  of  trade. 

"All  contracts  or  agreements,"  says  Comyn,  "which  have  for  their 
object  anything  against  the  general  policy  of  the  common  law  are 
void."  ^®®  This  general  principle  is  particularly  applied  to  contracts 
which  have  for  their  object  the  perversion  of  the  operations  of  the 
government.*  Every  citizen  owes  to  his  government  and  all  its 
oflQcers,  while  executing  their  oflBcial  duties,  truth  and  fidelity.  All 
the  actions  of  the  government  and  its  officers  are  based  upon  certain 
facts  assumed  or  proved,  and  falsehoods  with  reference  to  those 
facts  are  moral  wrongs,  injurious  to  the  whole  state  whose  govern- 
ment it  is,  and  therefore  against  public  policy.  Thus,  a  note  given 
for  forbearing  to  make  a  bid  on  a  government  mail  contract,!  or  a 
note  given  to  procure  the  passage  of  a  legislative  act  by  sinister 
means,  is  void.^'"  It  is  public  policy  for  the  courts  to  put  the  stamp 
of  their  disapprobation  on  every  act,  and  pronounce  void  every  con- 
tract, the  ultimate  or  probable  tendency  of  which  would  be  to  sully 
the  purity  or  mislead  the  judgments  of  those  to  whom  the  high  trust 
of  legislation  is  committed.  These  are  also  the  reasons  of  the  com- 
mon-law rules  with  reference  to  considerations  touching  the  admin- 
istration of  public  justice.*'*  The  public  welfare  requires  that 
crimes,  for  example,  should  be  investigated  and  punished,  and  it  is 
the  duty  of  a  citizen  paramount  to  all  others  to  give  every  assistance 
to  this  end.*'*  Every  instrument  given  in  pursuance  of  an  agree- 
ment to  obstruct  justice  as  between  immediate  parties  is  void. 
Therefore  a  note  given  to  stop  an  intended  prosecution  for  felony 

2«8  1  Com.  Cont  301;  Fonbl.  Eq.  bk.  1,  a  4,  8  4. 

•Gray  v.  Hook,  4  N.  Y.  449. 

t  Gullck  V.  Ward.  10  N.  J.  Law,  87. 

289  Mills  V.  Mills,  40  N.  Y.  543;  Lyon  ▼.  Mitchell,  36  N.  Y.  235;  Fuller  v. 
Dame,  18  Pick.  479;  Sedgwick  v.  Stanton,  14  N.  Y.  289;  Frost  v.  Inhabitants 
of  Belmont,  6  Allen  (Masa)  159;  TOOL  CO.  v.  NORRIS,  2  Wall.  45;  MAR 
SHALL  V.  RAILROAD  CO.,  16  How.  314. 

270  Henderson  v.  Palmer,  71  111.  579;  ROLL  v.  RAGIJET.  4  Ohio.  400.  4  IS; 
Gorham  v.  Keyes,  137  Mass.  583;    Harris  v.  Brlsco,  17  Q.  B.  Dlv.  504. 

iTi  Ilaynes  v.  Rudd,  83  N.  Y.  25L  See,  also,  Id.,  102  N.  Y.  372,  7  N.  E.  2S7. 
NEO.BILI^.— 19 


290  DEFENSES.  (Ch.  7 

and  not  to  appear  as  a  witness  before  the  grand  jury,  and  to  dismiss 
an  action  for  assault  and  battery, ^^'^  or  a  note  given  upon  a  consider- 
ation not  to  prosecute  tbe  maker's  son  for  forgery,*^'  is  illegal,  and 
cannot  be  enforced.  Agreements  based  upon  a  consideration  in  re- 
straint of  trade  are  held  against  public  policy  because  they  deprive 
the  public  of  the  services  of  men  in  the  spheres  in  which  they  are 
likely  to  be  most  useful,  and  expose  the  community  to  the  evils  of 
monopoly.  At  least  such,  according  to  the  text  writers,  was  the 
doctrine  of  the  early  common  law.  The  cases  were  classified  into 
three  divisions,  and  the  rules  pertaining  to  them  were  as  follows: 
(1)  When  the  contract  was  unlimited  in  time  and  space  and  in  total 
restraint  of  trade,  it  was  void.  (2)  WTien  the  restraint  was  limited 
as  to  space,  but  unlimited  as  to  time,  it  was  valid.  (3)  When  the 
contract  was  unlimited  as  to  space,  but  limited  as  to  time,  it  was 
void.  And  these  were  the  tests  applied  in  determining  whether 
bills  and  notes  were  void  or  valid  as  between  immediate  parties  in 
cases  when  the  defense  that  the  consideration  was  in  restraint  of 
trade  was  interposed.  So  coal  combinations  are  in  restraint  of 
trade,  and  a  check  given  for  a  balance  due  on  such  a  combination 
agreement  is  illegal.^^*  xVnd  so  a  bill  or  note  given  to  further  the 
objects  of  an  association  for  the  regulation  of  freight  and  passage 
rates  on  the  Erie  canal  is  illegal.^'"'  In  these  cases  it  is  obvious  that 
such  contracts  are  public  in  their  nature  and  against  the  public 
welfare.  With  them  the  reason  for  the  application  of  the  general 
rule  is  clear.  But  when  the  consideration  involves  a  transaction 
between  private  individuals,  the  early  doctrines  of  the  common  law 
are  not  those  at  present  accepted  by  the  courts.  Thus  instruments 
based  upon  a  consideration  in  partial  restraint  of  trade  between  indi- 
viduals are  undoubtedly  allowed,  the  distinguishing  point  being  that 
the  restriction  must  not  go  beyond  what  is  reasonable  to  protect 
the  favored  party,  regard  being  had  to  the  nature  of  the  business 
and  the  interests  of  the  public.*'"     And  it  is  worthy  of  remark  that 

STJ  GARDNER  v.  MAXET,  9  B.  Mon.  (Ky.)  90. 
«7  8  National  Bank  of  Oxford  v.  Kirk,  90  Pa.  St.  49. 
27  4  Morris  Run  Coal  Co.  v.  Barclay  Coal  Co.,  68  Pa.  St.  173. 
»7B  Stanton  v.  Allen,  5  Denio,  434. 

27  8  Mitchel  V.  Reynolds,  1  P.  Wms.  181.     See  cases  chronologically  arranged 
in  2  P.^rs.  Cont  p.  748,  note;   Nobles  v.  Bates,  7  Cow.  307;   Cbappel  v.  Brock- 


§  115)  REAL    AND    PERSONAL    DEFENSES.  291 

the  tendency  of  recent  decisions  is  to  relax  even  further  the  rigor 
•of  the  doctrine  that  all  contracts  in  general  restraint  of  trade  are 
void.  In  England  *'^  it  is  denied  that  such  has,  in  fact,  ever  been 
the  law,  and  that  such  a  rule  is  the  true  public  policy  is  doubted. 
^'If,"  said  Sir  George  Jessel,^^*  "there  is  one  thing  more  than  any 
other  which  public  policy  requires,  it  is  that  men  of  full  age  and 
competent  understanding  shall  have  the  utmost  liberty  of  contract- 
ing, and  that  contracts,  when  entered  into  freely  and  voluntarily, 
shall  be  held  good,  and  shall  be  enforced  by  courts  of  justice.  The 
theory  that  such  contracts  create  monopolies  is  also  to  be  ques- 
tioned. Competition  is  not  stifled.  The  business  is  open  to  all 
other  persons.  And  it  seems  a  sounder  legal  theory  to  say  that  a 
party  may  legally  purchase  the  trade  and  business  of  another  for 
the  very  purpose  of  preventing  competition.  The  validity  of  the 
contract,  if  supported  by  a  consideration,  will  depend  upon  the  rea- 
sonableness between  the  parties.^" 

Effect  of  Illegality. 

Such  are  the  most  important  classifications  of  the  very  large  num- 
ber of  cases  involving  bills  and  notes  given  upon  considerations  in 
violation  of  statutes,  of  rules  of  common  law,  and  in  contravention 
of  public  policy.  It  remains  to  speak  of  the  effect  of  the  illegality 
of  considerations  being  total  or  partial,  of  the  illegality  being  known 
to  all  the  parties,  and  the  rule  governing  illegal  or  immoral  consid- 
erations, and  those  in  contravention  of  public  policy,  when  used  as 
defenses  to  actions  brought  by  a  purchaser  of  the  instrument  for 
value  and  without  notice. 
Same — Illegality  as  being  Total  or  Partial. 

Partial  illegality  of  consideration  is  to  be  distinguished  from  par- 
tial lack  or  failure  of  consideration,  in  that  illegality,  whether  it  goes 

way,  21  Wend.  157;  Dunlop  v.  Gregory,  10  N.  Y.  241;  Alger  v.  Thacher,  19 
Pick.  51;  Amot  v.  Pittston  &  E.  Coal  Co.,  68  N.  Y.  55a 

277  Rousillon  V.  Rousillon,  14  Ch.  Div.  351. 

2T8  Printing  &  Numerical  Registering  Co.  v.  Sampson,  19  Eq.  Gas.  402. 

2TB  Whittaker  v.  Howe,  3  Beav.  383;  Jones  v.  Lees,  1  Hurl.  &  N.  18f>; 
Leather  Cloth  Co.  t.  Lorsont,  0  Eq.  Cas.  345;  Collins  v.  I>ocke,  4  A  pp.  Cns. 
674;  Oregon  Steam  Nav.  Co.  r.  Wlnsor,  20  WalL  64;  Morse  Twist  Drill  A. 
Mach.  Co.  V.  Morse,  103  Ma.ss.  73;  Diamond  Match  Co.  v.  Roeber,  lOli  N.  Y. 
473,  13  N.  E.  41U;   Leslie  v.  Lorillurd,  110  N.  Y.  5ii>.  IS  N.  E.  3U3. 


292  DEFENSES,  (Ch.  7 

to  the  whole  consideration  or  only  part  thereof,  avoids  the  whole  bill 
or  note.  If  any  part  of  a  contract  is  void  for  illegality,  all  of  it  i» 
void.  The  courts  will  not  unravel  and  separate  considerations  which 
are  good  and  considerations  which  are  illegal,  and  allow  recovery 
for  those  which  are  good.  In  this,  illegal  considerations  which  avoid 
the  instrument  differ  from  instruments  which  cannot  be  enforced 
because  of  partial  lack  or  failure  of  consideration,  the  latter  being, 
as  has  already  been  said,  good  pro  tanto.  And  this  is  so  because 
it  is  impossible  to  say  whether  the  legal  or  illegal  portion  of  the  con- 
sideration most  affected  the  mind  of  the  maker  or  acceptor  in  making 
his  promise.  The  law  will  not  permit  him  thus  to  seek  to  evade  its 
provisions  and  yet  stand  upon  and  recover  for  the  valid  part  of  the 
original  consideration.  Negotiable  instruments  are  not  contracts 
consisting  of  several  parts  based  on  several  transactions.  They  are 
not  of  the  kind  called  in  ordinary  contract  law  "severable."  As  to 
them  the  general  rule  of  contracts  that,  where  the  promises  and 
considerations  are  severable,  an  illegal  consideration  is  a  partial  de- 
fense, does  not  apply.  But  on  the  contrary,  the  undoubted  rule  is 
that  any  of  the  foregoing  kinds  of  illegal  considerations,  wlietlier 
total  or  partial,  are  defenses  to  the  recovery  upon  any  part  of  the 
instrument  between  immediate  parties. 
Same — Knowledge  of  Consideration — Intention. 

It  must  be  admitted  that  comparatively  few  cases  directly  involv- 
ing bills  and  notes  are  to  be  found  in  examining  the  question  of  the 
knowledge  of  a  party  of  the  illegality  of  a  consideration.  But  there 
seems  to  be  no  reason  why  the  well-settled  rules  of  contract  should 
not  be  applied  to  the  case  of  immediate  parties  to  negotiable  instru- 
ments. The  combinations  of  circumstances  to  which  these  rules 
of  contract  apply  are  where  the  consideration  consists  of  some  il- 
legal act,  which  it  is  the  mutual  intention  of  the  parties  to  perform; 
where  it  consists  of  some  act  legal  in  itself,  but  mutually  intended 
to  further  some  illegal  purpose;  where  one  party  intends  an  illegal 
act,  but  the  other  is  innocent  of  any  knowledge  concerning  it;  and, 
lastly,  where  one  party  intends  an  illegal  act  and  the  other  party 
knows  of  it,  but  is  innocent  of  any  participation  in  it.  In  the  case  of 
the  consideration  consisting  of  some  illegal  act  in  which  both  of  the 
parties  participate,  courts  will  not  enforce  the  instrument,  because 


§  115)  REAL    AND    PERSONAL    DEFENSES.  293 

courts  cannot  enforce  a  violation  of  law."°  This  rule  is  broad 
enough  to  cover  the  case  of  a  legal  consideration  intended  to  further 
an  illegal  intent,  because  the  parties  may  not  use  a  legal  act  to  cover 
a  wrong,  provided  that  their  intention  to  commit  a  wrong  was 
mutual,^ *^  and  the  loan  of  money  evidenced  by  the  bill  or  note  was 
in  furtherance  of  the  parties'  unlawful  purpose.^ ^*  But,  on  the 
other  hand,  if  the  contract  was  innocent  in  itself,  and  if  the  party 
enforcing  the  bill  or  note  was  ignorant  of  the  illegal  intention  of 
the  other  party,  he  is  entitled  to  its  full  benefits,^^^  and  the  courts 
will  not  shield  the  other  party,  because  he  alone  has  attempted  to 
further  some  illegal  purpose  of  his  own.  But  the  purpose  and  con- 
sideration of  the  instrument  must  be  innocent  and  legal,  for  if 
illegal,  although  its  illegality  was  unknown  to  the  prosecuting  party, 
it  is  unenforceable,  for  the  courts,  from  their  very  constitution,  can- 
not enforce  negotiable  instruments  upon  an  illegal  consideration, 
and  the  ignorance  of  the  party  himself  of  the  fact  that  that  consid- 
eration was  in  violation  of  the  law  does  not  excuse  him.^^*  Where, 
howe-^sr,  the  instrument  is  founded  upon  a  consideration  legal  in 
itself,  but  intended  by  one  party  to  further  an  illegal  purpose,  and 
the  other  party  knows  of  it,  but  takes  no  part  in  this  illegal  pur- 
pose, the  law  ia  much  more  diflBcult  of  interpretation.  It  is  the  opin- 
ion of  writers  '^^  and  courts  *®"  of  great  authority  that  no  recovery 
can  be  had  by  a  party  whose  rights  are  thus  tainted  with  his  knowl- 
edge of  its  illegal  purpose.  But  with  all  deference  to  the  opinions 
of  such  distinguished  jurists  it  is  submitted  that  they  are  not 
founded  upon  the  better  reason.  This  would  seem  to  be  that  as 
long  as  the  transaction  is  a  fair  and  honest  one  between  the  two 

»«o  McKlnnell  v.  Robinson,  3  Mees.  &  W.  434;  Cutler  v.  Welch,  43  N.  H. 
497;   Mordecal  v.  Dawkins,  9  Rich.  Law,  262. 

2«i  Blont  V.  Proctor,  5  Blackf.  265;   Cannan  v.  Bryce,  3  Barn.  &  Aid.  179. 

2  82  Ernst  V.  Crosby,  140  N.  Y.  3G4,  35  N.  E.  G03;  Tyler  v.  Carlisle.  79  Me. 
210,  9  Atl.  356;  Ruck  man  v.  Bryan,  3  Denlo,  340;  Cutler  v.  Welch,  43  N.  H. 
497;    Wright  v.  Crabbs,  78  Ind.  487. 

2«8  Plxley  V.  Boynton,  79  III.  351;   Quirk  v.  Thomas,  6  Mich.  76. 

284  Pol.  Cont.  322;   Anson,  Cont.  192;    Favor  v.  Phllbrick,  7  N.  II.  320. 

288  Daniel.  Neg.  Inst.  §  200. 

2««  Hiihliell  V.  Flint.  13  Gray.  277;  Hanauer  v.  Doane.  12  Wall.  342;  Tatum 
▼.  Kelley,  25  Ark.  209;  Graves  v.  Johnson,  156  Muss.  211,  30  N.  E.  818. 


294  DEFENSES.  (Ch.   7 

parties  before  the  court,  and  one  which  they  had  a  perfect  right  to 
enter  into,  the  subsequent  illegal  acts  of  one  of  them  should  not 
invalidate  the  contract,  as  to  the  other,  although  that  other  knew 
of  them,  unless  he,  too,  directly  or. indirectly,  participated  in  tbem. 
Wrongful  intent  is  not  punishable  by  law  when  nothing  is  done  tO' 
carry  that  intent  into  eiiect,  and  much  less  bare  knowledge  of  such 
an  intent,  without  any  participation  in  it.  The  subsequent  acts  of 
the  other  partj^  are  something  with  which  he  has  no  concern.^®^ 
And  the  true  rule  would  seem  to  be  that,  unless  there  was  evidence 
of  some  act  of  the  party  prosecuting  the  instrument  showing  that 
he  was  a  particeps  criminis  to  the  illegal  acts  of  the  other,  the  bare 
knowledge  of  the  holder  of  the  other's  intention  to  perpetrate  some 
illegal  act  would  not  be  a  defense  to  the  instrument  as  against  him. 

Same — As  Against  Bona  Fide  Holder. 

A  consideration  illegal  because  it  is  evil  or  immoral  or  against 
public  policy  is  not  a  ground  of  defense  to  an  action  brought  by  a 
purchaser  of  the  instrument  for  value  and  without  notice.  The 
reasons  we  have  already  given  in  this  section  as  those  which  have 
governed  courts  in  dealing  with  considerations  made  illegal  by  stat- 
ute prevail  in  these  cases  also.  It  is  therefore  needless  to  repeat 
them."' 

116.  DISCHARGE  OF  THE  INSTRUMENT.— A  nego- 
tiable instrument  may  be  discharged  by  payment,  or  by 
act  of  the  holder,  or  by  operation  of  law. 

117.  When  the  instrument  has  been  discharged,  it  ceases 
to  be  negotiable. 

"Discharge"  of  an  instrument  means  the  extinguishment  of  all 
rights  of  action  thereon.  Discharge  is  usually  effected  by  payment 
by  the  principal  debtor  at  maturity,  by  the  principal  debtor  becom- 
ing the  holder  at  maturity,  by  renunciation  or  release  by  the  holder 

28T  Krelss  V.  Seligman,  8  Barb.  439;  Tracy  v.  Talmage.  14  N.  T.  162;  Faik- 
ney  v.  Reynous,  4  Burrows,  2069;  Holman  v,  Johnson,  Cowp.  341;  Pellecat  v. 
Angell,  2  Cromp.,  M.  &  R.  311.    See  Tiffany,  Sales,  pp.  134-136. 

288  Tied.  Com.  Paper,  §  178;  Rand.  Com.  Paper,  §  1887;  Daniel,  Neg.  Inst- 
t  198;    Edw.  BiUs  &  N.  §  516. 


§  118)  REAL    AND    PERSO^AL    DEFENSES.  296 

at  maturity,  and  by  cancellation.*  It  may  also  be  discharged  by 
alteration. ^^*  In  some  cases,  though  rarely,  the  instrument  is  dis- 
charged by  operation  of  law.  The  instrument,  when  discharged,  is 
no  longer  negotiable;  and  even  when  transferred  to  a  purchaser 
without  notice  cannot  be  enforced,  because  it  is  merely  a  right  to 
enforce  money,  which,  upon  discharge  of  the  instrument,  no  longer 
exists.  Discharge  of  the  instrument  must  be  distinguished  from 
discharge  of  a  party  thereto. 

118.  PAYMENT.— A  bill  or  note  is  discharged  by  pay- 
ment at  or  after  maturity  by  or  on  behalf  of  the  accept- 
or or  maker  to  the  holder,  in  good  faith  and  •voithout 
notice  that  his  title  is  defective. 

Paymefnt. 

Payment  in  due  course  by  the  principal  debtor — that  is,  by  the  ac- 
ceptor or  maker — discharges  the  instrument,  because  it  is  a  per- 
formance of  the  contract  according  to  its  terms  by  the  person  pri- 
marily liable.**"     Payment  by  a  co-maker  or  co-acceptor  has  the 

♦See  Neg.  Inst  L.  §|  200-206.  Prof.  Ames  says  that,  If  title  has  vested  in 
the  payee,  "nothing  short  of  a  physical  destruction,  cancellation,  or  alteration 
of  the  instrument,  or  its  retransfer  to  the  acceptor  or  nialier  (or  the  drawer 
or  drawee,  if  the  bill  was  not  accepted),  can  afterwards  extinguish  it."  2 
Ames,  Cas.  Bills  &  N.  821.  This  has  reference  to  extinj^ishment  at  law,  as 
distinguished  from  equity.  Yet  although  the  instrument  be  not  retransferred, 
and  hence  Is  not  extinguished  at  law,  any  transferee  after  maturity  acquires  the 
legal  title  subject  to  equities  of  the  acceptor  or  maker  acquired  by  him  at  or 
after  maturity,  and  hence  the  acceptor  or  maker  Is  for  all  practical  purposes 
in  the  same  position  as  if  the  instrument  were  extinguished  at  law.  See  2 
Ames,  Cas.  Bills  &  N.  824.  This  distinction  between  extinguishment  at  law 
and  in  equity  is  not  generally  taken  in  the  cases  or  the  text-books,  and  the 
rule  is  broadly  stated  that  payment  or  renunciation  at  or  after  maturity,  with 
or  without  retransfer,  discharges  the  instrument. 

289  Ante,  p.  — . 

280  Eisam  v.  Denny,  15  C.  B.  87;  BARTRUM  v.  CADDY.  8  I-aw  .7.  Q.  B.  31; 
Ballard  v.  Creenbush,  24  Me.  33G;  Suydam  v.  Westfall,  2  Denio,  205;  Gordon 
V.  Wansey,  21  Cal.  77;  Gardner  v.  Maynard,  7  Allen,  450.  On  this,  se6 
SWOPE  V.  ROSS,  40  Pa.  St.  186,  which  holds  that,  since  the  acceptor  of  a  bill 
Is  really  the  debtor,  the  drawer  and  Indorser  being  merely  sureties,  the  debt 
is  extiugulbhed  by  its  payment  by  the  acceptor;  and,  save  where  the  ucceptauce 


296  DEFENSES.  (Ch.  7 

same  eflFect."^  Payment  by  an  accommodated  party,  although  he 
be  drawer  or  indorser,  Is  also  in  eflfect  a  discbarge,  because,  as  be- 
tween himself  and  the  accommodation  acceptor  or  maker,  he  is 
priuKuily  liable.^®*  Payment  by  the  accommodation  acceptor  or 
maker  also  discharges  the  instrument,^""  although  the  acceptor  or 
maker  paying  under  such  circumstances  could  compel  the  accom- 
modated party  to  refund  the  amount  paid.  Likewise  the  instru- 
ment is  discharged  if,  when  it  matures,  the  acceptor  or  maker  is 
or  becomes  the  holder,^"*  since  the  right  and  liability  are  coinci- 
dent in  one  and  the  same  person.  In  all  such  cases  payment  is  a 
defense,  even  as  against  subsequent  purchasere  without  notice,  for 
any  purchaser  thereafter  would  necessarily  acquire  the  instrument 
after  maturity,  and  hence  subject  to  defenses.^*"^  In  order  that  pay- 
ment or  coincidence  of  right  and  liability  should  operate  as  a  dis- 
charge, it  is  essential  that  the  instrument  should  have  matured; 
for  an  acceptor  or  maker  may  acquire  it  before  maturity,  as  pur- 
chaser, and  may  then  further  negotiate  it.^"'  Moreover,  although 
the  acceptor  or  maker  intends  the  transaction  to  take  effect  as  pay- 
ment and  discharge,  such  payment  would  be  no  defense  against  a 
purchaser  for  value  without  notice;  as  in  case  the  acceptor,  after 
paying  the  money  to  the  holder,  had  allowed  him  to  retain  the  in- 
strument, and  he  had  negotiated  it;  or  in  case  the  acceptor,  after 
thus  taking  up  a  bill  payable  to  bearer,  had,  before  it  matured, 
lost  it,  and  it  had  come  into  the  hands  of  an  innocent  purchaser.^^^ 

was  supra  protest,  no  right  of  action  remains  against  such  drawer  or  Indorser. 
See  Nog.  Inst  L.  §  200.     Cf.  sections  77,  90,  148. 

"1  HARMER  V.  STEELE,  4  Exch.  1;  Cox  v.  Hodge,  7  Blackf.  (Ind.)  146; 
Swem  V.  Newell,  19  Colo.  397,  35  Pac.  734. 

292  COOK  V.  LISTER,  32  Law  J.  C.  P.  127;  Lazarus  v.  Cowle,  8  Q.  B.  459; 
Woods  V.  Woods,  127  Mass.  141;    Blenn  v.  Lyford,  70  Me.  149. 

2  98  HARMER  V.  STEELE,  4  Exch.  1;  BARTRUM  v.  CADDY,  9  Adol.  &  E. 
275. 

2»<  HARMER  V.  STEELE.  4  Exch.  1;  Stewart  v.  Hidden,  13  Minn.  43  (Gil. 
•29);   Cbalm.  BlUs  &  N.  art.  238. 

396  GARDEN  V.  MAYNARD.  7  Allen  (Mass.)  456.     Ante,  p.  295. 

29«  ATTENBOROUGH  v.  MACKENZIE,  25  Law  J.  Exch.  244;  Swope  v. 
Ross,  40  Pa.  St  180;   Mishler  v.  Reed,  76  Pa.  St.  76. 

297  BURBRIDGE  v.  MANNERS,  3  Camp.  193.  It  was  held  In  this  case  that 
although  a  bill  cannot  be  reissued  after  it  has  arrived  at  maturity  and  been 


§  118)  REAL    AND    PERSONAL    DEFENSES.  297 

It  is  to  be  observed  that  an  acceptor  or  maker  purchasing  before 
maturity  is  not  a  purchaser  in  due  course;  and,  therefore,  although 
the  paper  be  transferable  by  delivery,  he  acquires  only  the  title 
of  his  transferrer,  and  hence,  unlike  an  ordinary  purchaser,  he  could 
not  acquire  title  from  a  finder  or  a  thief.*®"  Again,  in  order  that 
payment  should  operate  as  a  discharge,  it  must  be  made  to  the 
holder,  and  in  good  faith.*®"  The  acceptor  or  maker  must  occupy, 
in  this  respect,  substantially  the  position  of  a  purchaser  for  value 
without  notice.  If  paper  be  transferable  by  indorsement,  payment 
can  be  made  only  to  the  payee  named,  or  to  one  holding  under  his 
indorsement.^"**  Payment  under  a  forged  indorsement,  for  exam- 
ple, would  be  no  discharge."*^  But,  if  the  paper  be  transferable 
by  deliv'^ry,  payment  in  good  faith  to  the  bearer  would  be  a  dis- 
charge, whatever  the  infirmity  of  his  title.^"* 

Paym^a;:  by  one  secondarily  liable,  on  the  other  hand,  although 
at  or  aftei-  maturity,  is  not  a  discharge  of  the  instrument.  The 
diaT\:;r  and  indorser  are  liable  to  subsequent  parties,  but  prior  par- 

palii,  ytc  12  pail  and  afterwards  indorsed  before  It  becomes  due.  It  Is  a  valid 
seca^ltj  in  th,i  hands  of  a  bona  fide  indorsee.  In  the  case  of  Morley  v.  Cul- 
verwell,  7  Mees.  &  W.  174,  It  was  shown  that  the  drawer  of  a  bill  of  exchange, 
before  It  became  due,  agreed  with  the  acceptor  that,  on  his  giving  a  certain 
mortgage  security  for  the  amount,  he,  the  drawer,  would  deliver  the  bill  up  to 
him.  and  the  acceptor  accordingly  executed  the  mortgage  and  received  back 
the  bill  uncanceled.  It  was  held  that  the  drawer  was  liable  on  the  bill  to  a 
party  to  whom  the  acceptor  afterwards  Indorsed  it  for  value  before  it  came 
due;  and  that  the  plea  that  the  bill  was  paid  by  the  acceptor  before  it  came 
due,  and  afterwards  reissued  by  him  without  a  new  stamp,  could  be  supported 
only  by  proof  of  actual  payment  at  maturity  in  cash,  and  not  by  evidence  of 
an  arrangement  between  the  drawer  and  acceptor,  whereby  the  bill  was  treated 
as  being  satisfied.     WHEELER  v.  GUILD,  20  Pick.  (Mass.)  545. 

2»8  DE  SILVA  V.  FULLER,  1  Chit.  Bills,  p.  392;  2  Ames,  Cas.  Bills  &  N. 
823. 

298  See  Neg.  Inst.  L.  §  148.  Cf.  sections  314,  315,  as  to  payment  of  bills 
drawn  in  sets. 

8-^0  Doubleday  v.  Kress,  50  N.  Y,  410. 

801  SMITH  V.  SHEPARD,  Chltty,  Bills  (10th  Ed.)  180,  note. 

802  ANONYMOUS.  Style.  366;  Eastman  v.  Plumer,  32  N.  H.  238;  Bank 
of  U.  S.  V.  U.  S.,  2  How.  711;  Greve  v.  Schweitzer,  36  Wis.  554;  Chappelear 
V.  MarUn,  45  Ohio  St  132,  12  N.  E.  448;  STODDARD  v.  BURTON.  41  Iowa, 
582. 


298  DEFENSES.  (Ch.  7 

ties  are  liable  to  them.  Payment  by  the  drawer  or  indorser,  there 
fore,  unless  he  be  an  accommodated  party,  does  not  discharge  the 
instrument,  but  operates  as  against  prior  parties  by  way  of  pur- 
chase.^^^  The  drawer  or  indorser  is  remitted  to  his  former  posi- 
tion, and  may  enforce  the  instrument  against  prior  parties,  or  he 
may  again  indorse  and  transfer  it;  with  this  exception,  however, 
so  far  as  concerns  the  drawer:  that,  if  the  instrument  be  payable 
to  the  order  of  a  third  person,  the  drawer  cannot,  of  course,  upon 
making  payment,  again  indorse  and  transfer.^***  I'ayment  by  the 
drawer  or  indorser  does  not  inure  to  the  benefit  of  the  acceptor  or 
maker;  and,  therefore,  if  the  drawer  or  indorser  pays  to  the  holder 
part  of  the  amount  due,  or  even  the  whole  amount,  and  the  holder 
retains  possession  of  the  instrument,  he  may  recover  from  the  ac- 
ceptor or  maker  the  whole  amount.  He  would  then  hold  the  amount 
recovered  as  trustee  for  the  drawer  or  acceptor,  or  as  trustee  pra 
tanto  in  case  partial  payment  had  been  made  by  them.'**"^ 

It  is  well,  perhaps,  to  append  to  this  statement  a  few  scattered 
principles  usually  added  by  the  text  writers  to  their  remarks  upon 
this  branch  of  the  subject.  It  is  advisable  for  any  party  making 
payment  to  assure  himself  that  there  has  been  due  presentment, 
protest,  and  notice,  because  in  default  of  these  he  could  not  recover 
against  the  antecedent  indorsers  or  the  drawer  under  liability  to 
him.  It  is  also  advisable  for  him  to  look  to  the  identity  of  the 
holder,  and  that  he  traces  a  legal  title  to  the  instrument.  And 
lastly  that  he  take  the  instrument  itself  into  his  possession,  because 

»08  As  to  Indorser,  West  Boston  Sav.  Bank  v.  Thompson,  124  Mass.  506; 
Howe  Mach.  Co.  v.  Hadden,  8  Biss.  208,  Fed.  Cas.  No.  6,785;  Hayling  v.  Mull- 
hall,  2  W.  Bl.  1235;  Morgan  v.  Reintzel,  7  Cranch,  273.  As  to  drawer,  CALLOW 
V.  LAWRENCE,  3  Maule  &  S.  95;  Benj.  Chalm.  art.  234;  Story,  Bills,  §  422;  Rand. 
Com.  Paper,  §  427.  In  CALLOW  v.  LAWRENCE  the  drawer  of  a  bill  pay- 
able to  his  own  order,  and  Indorsed  by  him  to  T.,  and  by  T.  to  B.,  upon  the 
bill  being  dishonored,  paid  the  amount  to  B.,  who  struck  out  his  own  and  T.'s 
indorsement,  and  returned  it  to  the  drawer,  and  the  drawer  afterwards  passed 
it  to  the  plaintiff.  It  was  held  that  the  plaintiff  might  recover  against  the 
acceptor. 

804  Beck  v.  Robley,  1  H.  Bl.  89,  note;  GARDNER  v.  MAYNARD,  7  Allen 
(Mass.)  599.     See  Neg.  Inst.  L.  §  202. 

305  JONES  V.  BROADHURST,  9  C.  B.  173;  MADISON  SQUARE  BANK  v, 
PIERCE,  137  N.  Y.  444,  33  N.  E.  557. 


§  118)  REAL    AND    PERSONAL    DEFENSES.  299 

that  is  prima  facie  evidence  of  payment,  and  also  that  he  strengthen 
this  evidence  by  taking  a  separate  voucher  as  a  receipt.***"  This  last 
course  is  especially  desirable  in  case  of  an  indorser  making  pay- 
ment, because,  in  his  action  against  prior  parties,  possession  of  the 
instrument  is  in  some  cases  not  sufficient  evidence  of  its  payment 
by  him,  and  it  is  necessary  for  him  to  show  the  fact  of  payment 
by  himself  affirmatively.  For  this  purpose  a  receipt,  while  not  con- 
clusive, is  yet  very  strong  proof.*"''  The  person  to  whom  payment 
must  be  made  is  the  legal  holder  or  his  duly-authorized  agent. 
This  legal  ownership  depends  upon  two  principles.  If  the  instru- 
ment is  payable  to  bearer  or  indorsed  in  blank,  its  possession  is 
presumptive  evidence  of  right  to  collect  it.*°*  But  if  it  is  made 
payable  to  order  or  indorsed  to  order,  the  order  of  the  payee  is  nec- 
essary to  confer  title  and  right  to  collect,  and  mere  possession  is 
not  presumptive  evidence  of  title.*"®  In  such  cases,  where  it  is 
lawfully  in  the  holder's  possession,  there  must  be  shown,  in  addi- 
tion, some  evidence  of  agency  or  legal  right  to  receive  the  money, 
as  that  the  holder  is  the  assignee  of  a  bankrupt,  or  the  representa- 
tive of  the  dead  owner,  or  the  guardian  of  an  infant.*^"  The  sub- 
ject of  payment  by  negotiable  instrument  has  already  been  dis- 
cussed.*^* 

Same — Payment  or  Purchase, 

The  question  sometimes  arises  whether  a  transaction  amounts  to 
a  payment  and  discharge  or  to  a  purchase.  For  example,  while 
payment  in  due  course  by  the  principal  debtor  necessarily  dis- 
charges the  instrument,  he  might  pay  over  the  money  as  agent  for 
another,  who  intended  to  become  a  purchaser  of  the  instrument; 
and,  if  the  instrument  were  indorsed  to  such  purchaser,  or  if,  being 

808  Daniel.  Neg.  Inst.  c.  38,  §  2;    Tied.  Com.  Paper,  c.  19,  §§  372,  373. 
•  07  Mendez  v.  Carreroon,  1  Ld.  Raym.  742. 

»08  Mauran  v.  Lamb,  7  Cow.  174;  Merritt  v.  Cole,  14  Hmi,  324;  Bachellor 
v.  Priest.  12  Pick.  40G:   Bank  of  U.  S.  v.  U.  S.,  2  How.  711. 

809  Doubleday  v.  Kress,  50  N.  Y.  410;  POKTER  v.  CUSHMAN,  19  111.  572; 
Pease  v.  Warren,  29  Mich.  9. 

BioBayley.  Bills  (2d  Am.  Ed.)  320;   2  Pars.  Notes  &  B.  211;    Daniel,  Neg. 
Inst.  §  1230;   Tied.  Com.  Paper,  S  374. 
811  Ante,  p.  19. 


300  DEFENSES.  (Ch.   7 

payable  to  bearer,  it  were  delivered  to  the  person  paying  over  the 
money  as  agent  for  the  purchaser,  the  transaction  would  take  effect 
as  a  purchase.  Whether  such  a  transaction  is  a  payment  or  a  pur- 
chase depends  upon  the  intention  of  the  parties.  In  the  case  sup- 
posed, if  the  instrument  were  transferable  by  delivery,  it  might 
have  been  the  intention  of  the  holder  simply  to  receive  payment, 
and  to  deliver  up  the  instrument  to  the  person  discharging  it,  or  it 
might  have  been  his  intention  to  make  a  sale  of  the  instrument. 
So  far  as  the  acts  of  the  parties  go,  the  transaction  might  take 
effect  either  as  payment  or  as  purchase.  But  the  seller  even  of 
paper  transferable  by  delivery  incurs  liability  by  virtue  of  his  im- 
])lied  warranties,  and,  in  order  that  the  transaction  may  take  effect 
iis  a  sale,  there  must  be  evidence,  either  by  his  words  or  his  acts, 
of  his  intention  to  sell.  In  the  case  supposed,  since  his  acts  would 
not  necessarily  indicate  any  intention  to  assume  such  liability,  the 
transaction  would  take  effect  as  payment  and  discharge.'^^  So  if  a 
stranger  pays  the  amount  due  to  the  holder,  and  he  delivers  over 
the  instrument,  the  transaction  will  take  effect  as  payment,  unless 
the  holder  has  in  some  way  evidenced  his  intention  to  transfer  the 
instrument  to  the  payer  as  purchaser.^^'  If  the  facts  are  in  dis- 
pute, the  question  is  for  the  jury,  to  be  determined  according  to  the 
intention  of  the  parties  as  evidenced  by  their  words  and  acts.^^* 

Same — Payment  Supra  Protest. 

Ordinarily  one  who,  without  request,  pays  the  debt  of  another, 
acquires  thereby  no  right  of  reimbursement  against  the  debtor.  By 
the  law  merchant,  however,  an  exception  exists  in  the  case  of  what 
is  known  as  "payment  supra  protest,"  or  "for  honor,"  introduced  in 
aid  of  the  credit  and  circulation  of  bills  of  exchange,  but  not  ex- 

812  LANCEY  V.  CLARK,  64  N.  T.  209;  Burr  v.  Smith,  21  Barb,  262;  East- 
man V.  Plumer,  32  N.  H.  238;   Greening  v.  Patten.  51  Wis.  150,  8  N.  W.  107. 

818  Burr  V.  Smith,  supra.  Where  notes  were  surrendered  by  collection  bank, 
uncanceled,  to  one  under  no  obligation  to  pay,  who  stated  that  he  wished  to 
purchase,  and  not  to  pay,  them,  and  who  gave  full  value,  not  knowing  that 
the  bank  held  them  for  collection,  the  transaction  was  a  purchase.  Cussen  v. 
Brandt.  97  Va.  1,  32  S.  E.  791. 

8i4Kyne  v.  Erskine,  7  Mo.  App.  591;  Dougherty  v.  Deeney,  45  Iowa,  443; 
Swope  V.  Leffingwell,  72  Mo.  348. 


§  118)  REAL  AND  PERSONAL  DEFENSES.  301 

tended  to  promissory  notes.  Where  a  bill  has  been  protested  for 
Qon-payment,  any  party,  whether  drawer,  drawee,  payee,  or  indorser^ 
and  also  a  mere  stranger,  may  pay  it,  without  request,  for  the  honor 
of  any  party  or  parties.  In  case  of  such  payment  the  payor  has  a 
right  of  reimbursement  against  the  party  for  whose  honor  he  inter- 
venes and  against  all  prior  parties. ^^°  Subsequent  parties  are 
thereby  discharged.  His  position  is  the  same  in  effect  as  if  he  were 
the  indorsee  of  the  person  for  whose  honor  he  intervened,  and  had 
himself  paid  the  bill  to  the  holder.  If  he  pays  for  honor  generally, 
— that  is,  for  the  honor  of  all  parties  to  the  bill, — he  may  recover 
against  all  parties.  If  he  pays  for  the  honor  of  the  acceptor,  he 
may  sue  him  alone.  If  he  pays  for  the  honor  of  the  drawer,  he  may 
sue  the  drawer  and  the  acceptor.  The  cases  are  in  conflict,  how- 
ever, as  to  whether  he  may  in  such  case  recover  from  an  accommo- 
dation acceptor.  That  he  may  so  recover  has  been  finally  estab- 
lished in  England, ^^®  upon  the  ground  that  "the  person  who  takes 
up  a  bill  supra  protest  for  the  honor  of  a  particular  party  succeeds 
to  the  title  of  the  person  from  whom,  not  for  whom,  he  receives  it, 
and  has  all  the  title  of  such  person  to  sue  upon  it,  except  that  he 
discharges  all  the  parties  to  the  bill  subsequent  to  the  one  for 
whose  honor  he  takes  it  up,  and  that  he  cannot  indorse  it  over."  ^^^ 
The  contrary  doctrine  is  maintained  by  Mr.  Daniel  upon  the  ground 
that  he  succeeds  as  against  parties  anterior  to  the  one  for  whose 
honor  he  pays  to  the  rights  of  that  party. '^'  The  payment  must 
be  preceded  or  accompanied  by  a  declaration  for  whose  honor  he 
pays,  to  be  made  in  the  presence  of  a  notary  public,  and  the  decla- 
ration must  be  recorded  by  the  notary  in  the  protest  or  in  a  sepa- 
rate instrument.  The  payor  must  also  notify  the  party  for  whose 
honor  he  intervenes.'^' 

«"  MERTENS  V.  WINNINGTON,  1  Esp.  113;  In  re  Overend,  L.  R.  6  Eq.  344. 

818  In  re  Overend  (overruling  Ex  parte  LAMBERT,  13  Ves.  179),  supra; 
Ex  parte  Wackerbarth,  5  Ves.  574. 

817  In  re  Overend,  supra,  per  Sir  R.  Malins,  V.  C. 

«i8  Daniel,  Neg.  Inst.  §  1255.  See,  also,  McDowell  v.  Cook,  14  Miss.  420; 
Gazzara  v.  Armstrong,  3  Dana  (Ky.)  554.  It  would  seem  that  the  English 
rule  Is  adopted  by  Neg.  Inst.  L.  §  304,  but  this  is  perhaps  not  free  from  doubt. 

8i»As  to  payment  supra  protest,  see,  generally,  Daniel,  Neg.  Inst.  §§  1254- 
1258;    Rand.  Com.  Paper,  §S  1194-1197,  1437;    Neg.  InsL  L.  §§  300-30«. 


302  DEFENSES.  (Ch.  7 

119.  DISCHARGE  BY  ACT  OF  HOLDER.— The  holder 
may  discharge  the  instrument  by 

(a)  Renunciation  or  release  at  or  after  maturity; 

(b)  Cancellation. 

The  bolder  may  waive  his  right  to  payment,  and  if,  at  or  after  ma- 
turity, he  absolutely  and  unconditionally  renounces  or  releases  his 
right  against  the  acceptor  or  maker,  be  thereby  discharges  the  in- 
strument.^^" A  renunciation  before  maturity,  Hke  payment  before 
maturity,  does  not  afToct  the  rights  of  innocent  purchasers.^*^  The 
Negotiable  Instruments  Law  provides  that  a  renunciation  must  be 
in  writing,  unless  the  instrument  is  delivered  up  to  the  person  pri- 
marily liable  thereon. '^^  The  requirement  that  the  renunciation 
must  be  in  writing  changes  the  law,  for  at  common  law  the  renun- 
ciation may  be  by  way  of  gift  evidenced  in  any  way.^^'  So,  too,  the 
holder  may  waive  his  right  to  payment  by  an  intentional  cancella- 
tion of  the  instrument.  If  the  cancellation  be  made  unintention- 
ally, or  under  a  mistake,  it  is  inoperative;  but  the  burden  lies  upon 
the  party  who  alleges  that  it  was  unintentional  to  establish  the 
fact,'^*  Cancellation  may  be  made  by  destruction  of  the  instru- 
ment,^^" and  it  may  doubtless  be  made  in  any  other  way  that  evi- 

820  FOSTER  v.  DAWBER.  6  Exch.  839. 

821  DOD  V.  EDWARDS,  2  Car.  &  P.  602  (general  release);  MORLEY  v. 
CULVERWELL,  7  Mees.  &  W.  174. 

822  Section  203. 

823  FOSTER  V.  DAWBER,  6  Exch.  S39,  20  Law  J.  Exch.  385.  per  Wllles.  J. 
This  is  an  exception  to  the  common-law  rule  that  simple  contracts  cannot  be 
discharged  after  breach  except  by  deed  or  for  consideration.  Byles,  Bills 
(Wood's  Ed.)  *199.  But  many  cases  have  refused  to  recognize  such  an  excep- 
tion, holding  that  the  renunciation  may  be  by  way  of  gift,  but  that  to  consti- 
tute a  gift  there  must  be  delivery  with  intention  of  passing  title.  Bragg  v. 
Danielson,  141  Mass.  195.  4  N.  E.  022;  SLADE  v.  MUTRIE,  156  Mass.  19,  30 
N.  E.  1G8;  Henderson  v.  Henderson,  21  Mo.  379;  Benj.  Chalm.  Bills  &  N.  art. 
239,  and  notes;  4  Am.  &  Eng.  Enc.  Law  (2d  Ed.)  503.  Of  course,  renunciation 
accompanied  by  surrender  is  sufficient.  Sherman  v.  Sherman,  3  Ind.  337;  Halt 
v.  Rice,  124  Mass.  292;   Stewart  v.  Hidden,  13  Minn.  43  (Gil.  29). 

8  24  See  Neg.  Inst  L.  §§  200.  204. 

328  Blade  v.  Noland,  12  Wend.  (N.  Y.)  173;  Larkin  v.  Hardenbrook,  90  N.  Y. 
833. 


§  119)  REAL    AND    PERSONAL    DEFENSES.  303 

dences  upon  the  face  of  the  instrument  that  it  is  canceled,  as  bj 
obliteration,  writing,  stamping,  or  tearing.  It  may  be  made  before 
maturity;  but,  in  order  that  it  may  be  a  defense  in  such  case  against 
a  bona  fide  purchaser  for  value,  it  must  be  of  such  a  character  as 
to  carry  notice  to  him  on  the  face  of  the  instrument.^ ^* 

Discharge  hy  Operation  of  Law. 

The  instrument  is  discharged  in  certain  cases  by  operation  of 
law,  irrespective  of  the  intention  of  the  parties.^'^^  For  example, 
when  the  holder  appoints  the  acceptor  or  maker  his  executor,  though 
this  common-law  rule  is  generally  abolished  by  statute;  ^^^  or  where 
the  payee  of  a  note,  being  a  woman,  intermarries  with  the  maker, 
the  note  is  discharged,  and  cannot  be  revived  by  the  husband's 

«»«  In  INGHAM  v.  PRIMROSE,  7  C.  B.  (N.  S.)  82,  defendant  accepted  a  bill, 
and  delivered  it  to  M  to  get  it  discounted.  M,  failing  to  obtain  a  discount, 
returned  it  to  defendant,  who,  in  M's  presence,  tore  it  in  half,  with  the  inten- 
tion of  canceling  it,  and  threw  it  away  in  the  street,  M  piclied  it  up,  and 
afterwards  pasted  the  pieces  together,  and  passed  it  to  a  bona  fide  purchaser, 
who  indorsed  it  to  plaintifif.  A  verdict  was  directed  for  defendant,  with  leave 
to  plaintifif  to  move  to  enter  verdict  for  him,  the  court  to  be  at  liberty  to  draw 
inferences  of  fact.  It  was  held  that  the  bill  was  good  in  the  hands  of  a  bona 
fide  purchaser,  and  that  it  was  for  the  jury  whether  the  bill  on  its  face  in- 
dicated that  it  had  been  canceled;  and  the  court,  performing  the  function  of  a 
jury  under  the  rule,  found  that  the  purchaser  was  not  so  affected  with  notice 
by  the  appearance  of  the  bill.  Defendant's  treatment  of  the  bill  was  clearly 
a  cancellation,  but  it  seems  that  the  appearance  of  the  bill  was  such  as  to 
affect  him  with  notice,  even  if  the  defense  were  personal.  Cf.  Scholey  v.  Rams- 
bottom,  2  Camp.  485.  In  BAXENDALE  v.  BENNETT,  3  Q.  B.  Div.  525,  Brett, 
B.,  said  that  in  INGHAM  v.  PRIMROSE  the  acceptor  was  held  liable  "be- 
cause, said  the  court,  although  he  did  intend  to  cancel  it,  yet  he  did  not  cancel 
it.  It  seems  to  me  difficult  to  approve  that  case,  and  the  correct  mode  of 
dealing  with  it  is  to  say  we  do  not  agree  with  it."  If  a  bill  or  note  were  can- 
celed by  obliteration  or  stamping,  and  the  cancellation  marks  were  subse- 
quently fraudulently  erased,  so  that  the  question  of  notice  from  the  face  of 
the  instrument  did  not  arise,  it  is  clear  that  the  defense  of  cancellation  would 
be  good  against  a  bona  fide  purchaser.  District  of  Columbia  v.  Cornell,  130 
U.  S.  655,  9  Sup.  Ct  694.  The  English  Bills  of  Exchange  Act  provides  (section 
63):  "Where  a  bill  Is  Intentionally  canceled  by  the  holder  or  his  agent,  and 
the  cancellation  is  apparent  thereon,  the  bill  is  discharged." 

S27  KRKAKLEY  v.  FOX.  9  Barn.  &  C.  130. 

»a«  Daniel,  Neg.  Inst  §§  1283,  1285. 


304  DEFENSES.  (Ch.  7 

death;  "•  and  where  a  note  made  by  a  single  woman,  who  after- 
wards marries,  is  transferred  to  her  husband,  the  note  is  discharged^ 
and  cannot  be  revived  by  a  retransfer  by  the  husband  to  the 
payee.*"  These  rules  are  doubtless  affected  in  many  states  by  leg- 
islation concerning  the  property  rights  of  married  women.  Other 
instances  of  discharge  commonly  cited  are  discharge  of  the  debtor 
by  an  insolvent  or  bankruptcy  act,  and  merger  of  the  right  of  ac- 
tion against  a  party  to  the  instrument  in  a  judgment  against  him. 
These  discharges,  however,  are  not  discharges  of  the  instrument. 
Nor  does  the  discharge  of  a  bankrupt  release  a  party  secondarily 
liable. 

120-121.  DISCHABGE  OF  PARTIES  SECONDARILY 
LIABLE. — Where  the  holder  of  a  negotiable  instrument 
does  any  act  which  will  impair  any  right  of  the  drawer 
or  of  any  indorser  against  other  parties  to  the  instrument 
liable  to  him,  it  operates  as  a  discharge  of  the  obligation 
of  the  drawer  or  indorser.  This  does  not  apply  if,  subse- 
quent to  such  discharge,  a  purchaser  for  value  without 
notice  before  maturity  acquires  the  instrument. 

In  addition  to  the  methods  of  discharge  extinguishing  the  instru- 
ment itself  as  an  obligation  must  be  mentioned  the  methods  of  dis- 
charge extinguishing  the  several  contracts  of  the  drawer  and  in- 
dorsers  in  their  character  of  a  surety  thereupon  by  operation  of  the 
general  rule  of  suretyship  applied  to  the  law  of  negotiable  bills  and 
notes."^  The  principle  underlying  this  method  is  that  if  the  holder 
of  a  bill  or  note  does  any  act  which  will  impair  any  right  of  the 
drawer  or  indorsers  against  other  parties  to  the  instrument  liable 
to  him,  the  drawer  or  indorser  will  be  discharged.  The  reason  for 
this  rule  is  the  promise  implied  in  law,  that,  if  either  the  drawer  or 
indorser  pays  the  instrument,  parties  liable  to  him  will  reimburse 
him  for  such  payment,  and  that  to  effect  such  end  upon  payment  the 

•  »»  ABBOTT  V.  WINCHESTER,  105  Mass.  115. 
•«o  CHAPIklAN  V.  KELLOGKJ,  102  Mass.  246. 

•  «i  See  Neg.  Inst.  L.  §  201. 


§§  120-121)  REAL    AND    PERSONAL   DEFENSES.  305 

drawer  or  indorser  is  entitled  to  demand  its  possession  from  the 
creditor,  and  to  be  subrogated  to  all  remedies  possessed  by  him 
against  the  prior  parties  thereon,  unimpaired  by  any  act  of  such 
creditor, — a  promise  which  the  creditor  also  impliedly  ratifies  in 
making  his  contract  with  the  indorser.^'*  If  the  creditor  violates 
any  part  of  this  contract,  this  violation  releases  the  indorser.  From 
this  principle  flow  several  principles  which  are  of  very  common  ap- 
plication.    They  are  as  follows: 

(1)  Whatever  discharges  the  acceptor  or  maker  discharges  the 
drawer  or  indorsers,  because  the  ultimate  remedies  of  the  drawer 
or  indorsers  are  against  these  parties,  and  releasing  them  extin- 
guishes the  obligation  which  in  turn  they,  aa  sureties,  undertook 
should  be  performed.''^ 

(2)  Any  act  of  the  holder  which  discharges  a  prior  indorser  dis- 
charges subsequent  ones,  because  such  prior  indorser  guarantied 
subsequent  indorsers  that  he  would  pay  if  the  maker  or  acceptor 
did  not.  As  far  as  they  were  concerned,  he  stood  in  the  position 
of  a  principal  upon  the  contract,  and  the  release  of  their  principal 
also  releases  them.  A  discharge  of  a  prior  indorser  therefore  is  like 
a  discharge  of  the  maker  or  acceptor,  and  the  holder  violates  this 
contract  with  them."^ 

882  SHUTTS  V.  FINGAR,  100  N.  Y.  539,  3  N.  E.  588;  Goodyear  v.  Watson,  14 
Barb.  481;  Clason  v.  Morris,  10  Johns.  524.  A  valid  tender,  like  payment,  dis- 
charges parties  secondarily  liable.  Spurgeon  v.  Smitha,  114  Ind.  453,  17  N.  E. 
105;  Joslyn  v.  Eastman,  46  Vt.  258;  Neg.  Inst.  L.  §  201.  A  release  of  the  prin- 
cipal debtor  with  an  express  reservation  of  the  holder's  right  of  recourse  against 
tie  party  secondarily  liable  does  not  discharge  the  latter,  his  rights  against 
the  principal  debtor  being  reserved  by  implication.  STEWART  v.  EDEN,  2 
Caines  (N.  Y.)  121;  ROCKVILLE  NAT.  BANK  v.  HOLT,  58  Conn.  526.  20  Atl. 
669;  Daniel,  Neg.  Inst.  §  1310;  Neg.  Inst.  L.  §  201. 

833  Sargent  v.  Appleton,  6  Mass.  85;  Couch  v.  Waring,  9  Conn.  261;  Gimnls 
V.  Weigley,  114  Pa.  St.  194,  6  Atl.  465. 

83*  Newcomb  v.  Raynor,  21  Wend.  108.  In  this  case  it  was  held  by  Nel- 
son, C.  J.,  that,  "as  between  the  first  and  subsequent  indorsers,  the  former 
must  be  regarded'  In  the  light  of  principal.  He  stands  behind  them  upon  the 
paper,  and  Is  bound  to  take  It  up.  In  case  of  default  of  the  maker.  A  dis- 
charge of  him,  therefore,  by  the  holder  (regarding  the  relative  position  of  the 
parties),  on  general  principles,  operates  to  release  them."  SHUTTS  v. 
FINGAR,  100  N.  Y.  539.  3  N.  E.  588. 
NEG.BILLS.— 20 


306  DEFEiNSES.  (Ch.  7 

(3)  If  the  holder  releases  securities  held  by  him  as  collateral  to 
claims  against  parties  against  whom  the  indorser  would  have  re- 
course, it  releases  the  indorser  pro  tanto.  This  is  because  the  surety, 
upon  payment  of  the  claim  against  his  principal,  has  a  right  to  be 
put  in  the  place  of  the  creditor.  He  has  a  right  to  enforce  every 
means  of  payment  against  the  principal  debtor  the  creditor  had. 
These  securities  were  a  means  of  such  enforcement,  and  he  has  a 
right  to  them.  Every  remedy  the  creditor  had,  upon  payment  by 
the  surety,  belongs  to  him.  And  if  the  creditor  impairs  the  rights  of 
the  surety  in  this  respect,  he  breaks  his  contract  with  him  and  releases 
him.*'"^ 

(4)  Where  the  holder  of  the  instrument  upon  a  valid  consideration 
makes  a  definite  promise  to  extend  the  time  or  forbear  suit  against 
a  party  liable  to  a  drawer  or  indorser,  this  discharges  the  drawer 
or  indorser.  The  reasons  for  this  rule  are  that  it  creates  a  contract 
different  from  the  one  the  surety  guarantied,  and  that  it  prevents 
the  surety  from  protecting  himself  by  paying  forthwith  the  princi- 
pal's debt  and  immediately  bringing  suit  against  him.^^*     But  it 

«S8  Goodyear  v.  Watson,  14  Barb.  481;  Clason  v.  Morris,  10  .Tohns.  539; 
Craythorne  v.  Swinburne,  14  Ves.  1G9;    Mathews  v.  Alkin,  1  N.  Y.  595. 

838  Sieboneck  v.  Anchor  Sav.  Bank,  111  Pa.  St.  187,  2  Atl.  485;  Batavian 
Bank  v.  McDonald,  77  Wis.  486,  46  N.  W.  902;  Stevens  v.  Oaks,  58  Mich.  343, 
25  N.  W.  309;  English  v.  Darley,  2  Bos.  &  P.  61.  In  the  case  of  Okie  v. 
Spencer,  2  Whart.  253,  the  holder  of  a  note  took  a  check  from  tbe  maker,  dated 
six  days  subsequent  to  the  maturity  of  the  note,  and  with  the  understanding 
that  the  check  was  to  be  in  full  satisfacion  of  such  note,  if  paid.  It  was  held 
that  this  constituted  an  extension  to  the  maker,  and  discharged  an  indorser.  In 
the  case  of  Tiernan  v.  Woodruff,  5  McLean,  350,  Fed.  Cas.  No.  14,028,  a  bank- 
rupt obtained  for  a  valuable  consideration,  from  a  creditor,  two  montlis'  time, 
during  which  the  creditor's  right  to  bring  siiit  was  suspended.  It  was  claimed 
by  the  indorser  that  this  operated  to  discharge  him  from  his  indorsement,  but 
it  was  held  that  since,  by  the  bankrupt  law,  the  bankrupt  was  discharged  of 
all  liability,  and  since  the  sole  remedy  of  the  Indorser  lay  in  liis  presentation 
of  his  future  liability  against  the  bankrupt's  estate,  his  right  was  not  preju- 
diced by  the  extension  of  time,  and  there  was  no  discharge.  In  LAXTON  v. 
PEAT,  2  Camp.  185,  It  was  held  that  If  the  Indorsee  of  a  bill  of  exchange,  hav- 
ing notice  that  it  was  accepted  without  consideration,  receive  part  payment 
from  the  drawer,  and  give  him  time  to  pay  the  residue,  he  thereby  discharges 
the  acceptor.  In  the  case  of  Pannell  v.  M'Mechen.  4  Har.  &  J.  (Md.)  474, 
"the  drawer  and  indorser  of  a  note,  being  unable  to  meet  their  engagements, 


§§  120-121)  REAL    AND    PERSONAL    DEFENSES.  307 

must  be  a  new  contract  which  is  created  and  substituted  for  the  old 
one.  It  must  be  with  the  principal  himself/^^  and  must  have  a 
valid  consideration.'"*  It  must  be  absolute,"*  and  not  indefinite."*" 
And  it  must  hare  all  other  requisites  necessary  to  create  a  con- 
tract.    The  surety  must  not  assent  to  it,"*^  and  it  must  be  with- 

f)roposed  to  compound  with  their  creditors,  and  executed  a  deed  of  trust 
to  trustees,  of  whom  the  defendant  was  one,  to  be  applied  to  the  payment  of 
debts  In  the  order  directed,  thereby  securing  to  the  defendant  the  payment 
•of  the  note  in  question,  on  the  terms  that  such  creditors  as  should  become 
parties  to  the  deed  should  have  an  interest  in  the  property  conveyed.  The 
deed  contained  a  clause  releasing  the  drawer  and  first  indorser,  on  the  ex- 
press terms  that  the  release  should  extend  to  no  other  terms.  The  plaintiff 
and  defendant  assented,  and  signed  the  instrument.  ♦  •  •  Therefore 
•  •  •  the  court  are  clearly  of  the  opinion  that  the  release  In  this  case 
cannot  discharge  the  defendant."  (Per  Johnson,  J.)  In  CaUott  v.  Haigh.  3 
Camp.  281,  it  was  held  that  the  drawer  of  an  accommodation  bill  was  not 
discharged  by  time  being  given  the  acceptor,  and  in  FENTUM  v.  POCOCK,  5 
Taunt.  192,  it  was  held  that,  if  the  holder  of  a  biU  accepted  for  the  accom- 
modation of  the  drawer  takes  a  cognovit  from  the  drawer  for  payment  by 
installments,  he  does  not  thereby  discharge  the  acceptor,  whether  the  holder 
knew  at  the  time  of  taking  the  bUl  that  it  was  an  accommodation  bill  or 
not  As  to  the  effect  of  release,  where  the  paper  was  made  or  ac- 
■cepted  for  accommodation,  see  Daniel,  Neg.  Inst  §§  1332a-1338a;  Benj.  Chalm. 
Bills  &  N.  p.  259. 

337  Harbert  v.  Dumont,  3  Port.  (Ind.)  346. 

3  38  McLemore  v.  Powell,  12  Wbeat.  554.  It  was  held  by  Justice  Story, 
In  this  case,  that:  "The  case  then  resolves  itself  into  this  question,— whether 
a  mere  agreement  with  the  drawers  for  a  delay,  without  any  consideration 
for  It,  and  without  any  communication  with,  or  assent  of,  the  Indorser,  is  a 
discharge  of  the  latter,  after  he  has  been  fixed  in  his  responsibility  by  the 
refusal  of  the  drawee,  and  due  notice  to  himself,  and  we  are  all  of  opinion 
that  It  does  not.  •  •  •  In  order  to  produce  such  a  result,  the  agreement 
must  be  one  binding  in  law  upon  the  parties,  and  have  sufficient  considera- 
tion to  support  It"  Davis  v.  Graham,  29  Iowa,  514;  Galbraith  v.  Fullerton, 
53  lU.  128. 

«3»  Hansberger  v.  Gelger,  3  Grat.  144. 

«*o  Gardner  v.  Watson,  13  111.  347;  Blackstone  Bank  v.  Hill,  10  Pick.  133; 
Abel  V.  Alexander,  45  Ind.  523;  People's  Bank  v.  Legrand,  103  Pa.  St.  309; 
Beach  v.  Zimmerman,  106  Ind.  498,  7  N.  E.  237. 

»*i  Gloucester  Bank  v.  Worcester,  10  Pick.  528;  Prouty  v.  Wilson,  123  Mass. 
297;  Smith  v.  Hawkins,  6  Conn.  444;  ROCKVILLE  NAT.  BANK  v.  HOLT, 
58  Conn.  526,  20  Aa  669. 


308  DEFENSES.  (Ch.  7 

out  reservation  as  to  him.»"  It  is  to  be  added,  by  way  of  caution, 
that  this  rule  must  not  be  understood  to  mean  mere  delay,""  nor 
part  payment,'**  nor  the  receipt  by  the  creditor  of  collateral  security 
to  protect  his  clainL**'  For  these  in  no  wise  prejudice  the  surety 
in  his  position. 

SUMMARY  OF  DEFENSES. 
Real  Defenses. 

(1)  Incapacity  to  contract:  (a)  Infancy;  (b)  coverture,  In  some  Jurisdictions; 
(c)  insanity;   (d)  intoxication;   (e)  corporate  incapacity. 

(2)  Illegality,  when  the  contract  Is  declared  void  by  statute. 

(3)  The  discharge  of  the  instrument  by  (a)  alteration;  (b)  cancellation;  (c> 
payment,  or  renunciation  or  release,  at  or  after  maturity. 

Personal  Defenses. 

(1)  Fraud,  whereby  the  defendant  was  induced  to  execute  the  instrument; 

(2)  Duress; 

(3)  Want  or  failure  of  consideration; 

(4)  Illegality,  unless  the  contract  is  declared  void  by  statute; 

(5)  Payment,  or  renunciation  or  release,  before  maturity; 

(G)  Discharge  of  party  secondarily  liable  by  discharge  of  prior  party. 

«<2  Mulr  V.  Crawford,  L.  R.  2  H.  L.  Sc.  456;  Owen  v.  Homan,  4  H.  L,  Cas. 
997;    Neg.  Inst.  L.  §  201. 

8<3  POWELL  V.  WATERS,  17  Johns.  176;  Sterling  v.  Marietta  &  S.  Trading 
Co.,  11  Serg.  &  R.  179;  Freemans  Bank  v.  Rollins,  13  Me.  202;  Sohn  v.  Morton, 
92  Ind.  170. 

«**  Greenawalt  v.  McDowell,  65  Pa.  St.  464;    Hill  v.  Bostick,  10  Yerg.  410. 

«4B  Beard  v.  Root,  4  Hun,  357;  Gary  v.  White,  52  N.  Y.  138;  Andrews  v. 
Marrett,  58  Me.  539;  CONTINENTAL  LIFE  INS.  CO.  v.  BARBER,  50  Conn, 
567. 


§  122)  PURCHASER    FOR   VALUE    WITHOUT    NOTICE.  309 

CHAPTER  Vm. 

PURCHASER  FOR  VALUE  WITHOUT  NOTICE. 

122.  What  Constitutes. 

12S-124.  Value. 

125-127.  Notice. 

128-131.  Presumption  and  Burden  of  Proof— Order  of  Prool!. 

WHAT  CONSTITUTES. 

122.  To  constitute  a  purchase^"  of  a  negotiable  instru- 
ment a  purchaser  for  value  without  notice,  the  purchase 
must  be: 

(a)  For  a  valuable  consideration. 

(b)  Without  notice  of  facts  vtrhich  impeach  its  validity 

bet'ween  antecedent  parties. 

It  remains  in  this  chapter  to  examine  consideration  and  no- 
tice, the  two  other  elements  of  bona  fide  title  yet  undiscussed. 
The  purchaser,  in  order  to  entitle  him  to  the  immunities  of  nego- 
tiability, must  be  both  a  holder  for  value,  and  also  a  holder  without 
notice.^  Both  of  these  factors  must  concur  in  his  holding.  A  pur- 
chaser for  value  may  or  may  not  be  a  purchaser  without  notice.  A 
purchaser  without  notice  irrespective  of  the  rights  he  may  acquire 
upon  transfer,  cannot  overcome  equities  if  he  has  paid  no  value. 
In  the  former  case  it  makes  little  difference  that  the  holder  took  the 
instrument  and  paid  its  face  for  it;  in  the  latter,  that  he  took  the 
instrument  in  the  truest  faith.^  In  the  present  chapter  we  shall  con- 
sider the  questions:  What  consideration  is  necessary  to  make  the 
holder  a  purchaser  for  value,'  and  how  far  "antecedent"  or  "pre-ex- 

1  Paper  transforrod  after  maturity,  see  ante,  p.  207.  As  to  what  constitutes 
A  "bolder  In  due  course,"  see  Neg.  Inst.  L.  §  91.     Cf.  §§  90-98. 

2  Nortliampton  Nat.  Bank  v.  Kidder,  106  N.  Y.  221,  12  N.  E.  577;  Weavei 
V.  liarden,  49  N.  Y.  286. 

»  "The  rule  appears  to  be  settled,  tbat  a  promissory  note,  to  be  tbe  subject 


310  PURCHASER    FOR    VALUE    WITHOUT    NOTICE.  (Cll.  & 

isting"  indebtedness  is  sufficient;  what  constitutes  notice;  and,  last- 
ly, what  presumptions  of  evidence  attach  to  a  negotiable  bill  or  note 
in  the  hands  of  a  bona  fide  holder  *  upon  trial. 

VALUE. 

123.  Value,  as  a  consideration  for  transfer,  means  any- 
legal  consideration  sufficient  to  support  a  contract.  An 
antecedent  or  pre-existing  debt  in  most  jurisdictions  con- 
stitutes value  sufficient  for  a  consideration  for  a  negotia- 
ble bill  or  note  or  the  transfer  thereof. 

124.  THE  TRANSFER.— A  bill  or  note  transferred  as 
collateral  to  an  indebtedness  is  in  most  jurisdictions 
transferred  for  value  and  upon  a  sufficient  consideration. 

"Value''  in  the  term  "purchaser  for  value''  means  "either  money  or 
money's  worth."  °  It  may  be  cash  paid  out.  It  may  be  goods  given. 
It  may  be  rights  surrendered.     It  may  be  liabilities  incurred.     Any- 

of  sale,  must  be  an  existing  valid  note  In  the  hands  of  the  payee,  and  glveo 
for  some  actual  consideration,  so  that  it  can  be  enforced  between  the  original 
parties."  Noxon,  J.,  in  SWEET  v.  CHAPMAN,  7  Hun  (N.  Y.)  576.  Where  a 
note  is  discounted  by  a  banli  to  extinguish  a  debt  which  Is  owed  to  the  bank 
by  the  holder,  or  where  it  applies  the  proceeds  for  the  purpose  of  discharging 
his  liabilities,  the  acts  of  the  bank  amount  to  the  payment  of  value  at  the 
time,  and  the  bank  Is  a  holder  for  valuable  consideration.  BANK  OF  SAN- 
DUSKY V.  SCOVILLE,  24  Wend.  (N.  Y.)  115.  To  the  same  effect,  see  BANK 
OF  SALINA  V.  BABCOCK,  21  Wend.  (N.  Y.)  499.  In  BROWN  v.  LEAVITT,  31 
N.  Y.  113,  it  was  held  that  where  a  note  Is  indorsed  and  delivered  to  a  partyr 
before  it  falls  due,  in  payment  of  a  note  already  due,  such  transaction  con- 
stitutes the  party  a  holder  for  value.  And  see  Rice  v.  Grange  (N.  Y.  App.) 
30  N.  E.  46,  Johns.  Gas.  Bills  &  N.  174. 

*  "Bona  fide  holder,"  "innocent  indorsee,"  "bona  fide  holder  without  notice 
and  for  value,"  "purchaser  in  the  usual  coiirse  of  business,"  "purchaser  In  due 
course,"  "holder  in  due  course,"  "purchaser  without  notice,"  are  terms  in- 
difforently  and  synonymously,  though  loosoly,  applied  to  what  is  in  this  sec- 
tion termed  "the  purchaser  for  value  without  notice."  The  Negotiable  Instru- 
ments Law,  like  the  English  Bills  of  Exchange  Act  uses  the  term  "holder  in 
due  course."  "The  act  has  substituted  the  term  'holder  in  due  course'  for 
the  cumberous  equivalent  'bona  fide  holder  for  value  without  notice';  and  its 
synonyms  'bona  fide  holder,'  'innocent  holder,'  etc"  Chalm.  Bills  Exch.  (4tb 
Ed.)  89. 

6  2  Ames,  Cas.  Bills  &  N.  p.  867. 


§  123-124)  VAH.S:.  313 

thing  which  men  in  business  call  "property,"  anything  for  which  a 
court,  on  some  one  being  deprived  of  it,  would  award  damages,  is 
Talue;  and  the  purchaser  who  gives  it  in  exchange  for  a  bill  or  note 
is  a  purchaser  for  value,  or  a  purchaser  for  a  valuable  consideration. 

Antecedent  indebtedness  means  a  debt  already  existing  at  the 
time  of  the  execution  of  a  contract,  whatever  it  may  be.  Such,  for 
example,  are  a  note  for  which  a  renewal  note  is  given,  or  a  debt  cre- 
ated in  buying  goods  for  which,  at  the  expiration  of  the  terms  of 
credit  for  which  the  goods  were  sold,  a  note  is  given  in  extension. 
The  importance  of  the  doctrine  relates  almost  always  to  the  ques- 
tion whether  the  purchaser  of  the  paper  is  a  holder  for  value  or  not. 
If  he  is  to  be  treated  as  a  holder  for  value,  then  the  defenses  in 
favor  of  prior  parties  are  ruled  out;  if  not,  then  any  prior  party  may 
raise  such  defenses  as  he  has  against  the  person  who  has  taken  the 
instrument  without  notice,  but  in  consideration  of  the  alleged  ante- 
cedent indebtedness. 

The  wisest  theory,  all  things  being  considered,  is  the  doctrine  of 
Judge  Story."  He  lays  down  the  doctrine  that  receiving  such  paper 
in  payment  or  as  security  for  a  pre-existing  debt  is  receiving  it  for 
a  valuable  consideration,  **It  is  for  the  benefit  and  convenience 
of  the  commercial  world,"  he  says,  "to  give  as  wide  an  extension  as 
practicable  to  the  credit  and  circulation  of  negotiable  paper,  that 
it  may  pass,  not  only  as  security  for  new  purchases  and  advances, 
made  upon  the  transfer  thereof,  but  also  in  payment  of  and  as  secu- 
rity for  pre-existing  debts.  The  creditor  is  thereby  enabled  to  real- 
ize or  to  secure  his  debt,  and  thus  may  safely  give  a  prolonged 
credit,  or  forbear  from  taking  any  legal  steps  to  enforce  his  rights. 

«  SWIFT  V.  TYSON.  14  Curt.  Dec.  166,  16  Pet.  1,  Johns.  Cas.  Bills  &  N.  179. 
The  opinion  In  SWIFT  v.  TYSON,  so  far  as  It  declared  that  paper  taken  as 
collateral  security  for  an  antecedent  debt  is  taken  for  value,  has  been  the  sub- 
ject of  adverse  criticism;  but  It  has  been  affirmed  after  full  discussion  In 
Brooklyn  City  &  N.  R.  Co.  v.  National  Bank,  102  U.  S.  14.  Harlan,  J.,  said: 
"Our  conclusion,  therefore,  is  that  the  transfer,  before  maturity,  of  negotiable 
paper,  as  security  for  an  antecedent  debt  merely,  without  other  circumstances. 
If  the  paper  be  so  Indorsed  that  the  holder  becomes  a  party  to  the  instrument, 
although  the  transfer  is  without  express  agreement  by  the  creditor  for  indul- 
gence, Is  not  an  Improper  use  of  such  paper,  and  Is  as  much  in  the  usual  course 
of  commercial  business  as  its  transfer  in  payment  of  such  debt.  In  either 
case,  the  bona  fide  holder  Is  unaffected  by  eyuilies  or  defeuseB  belwoeu  prior 
piuticH,  of  which  he  had  no  notice." 


312  PURCHASER  FOR  VALUE  WITHOUT  NOTICE.         (Ch.  8 

Tlio  debtor  also  has  the  advantage  of  making  his  negotiable  securi- 
ties of  equivalent  value  to  cash.  •  ♦  •  The  [opposite]  doctrine 
would  strike  a  fatal  blow  at  all  discounts  of  negotiable  securities  for 
pre-existing  debts,"  This  doctrine  is  followed  by  the  weight  of  au- 
thority throughout  the  United  States.  And  it  certainly  seems  the 
sounder  business  policy  to  maintain  that  the  transfer  of  a  negotiable 
security  both  in  payment  and  as  security  for  an  antecedent  debt  is  a 
transfer  for  value.''  However,  the  courts  of  some  jurisdictions,  and 
particularly  of  the  state  of  New  York,  have  taken  issue  with  the 
doctrine  of  Judge  Story.  The  reasoning  of  these  courts  is  based  not 
so  much  upon  the  practical  doctrines  of  commercial  convenience  as 
upon  the  strict  logic  of  the  law  itself.  Their  doctrine  is  that  the 
position  of  the  bona  fide  holder  rests  its  foundations  upon  the  equi- 
table doctrine  that  a  purchaser  who  holds  the  legal  title  to  property 
merely  as  security  or  as  the  payment  of  a  pre-existing  debt,  without 
parting  with  anything  of  value,  is  not  entitled  to  hold  as  against 
the  prior  equitable  owner.  The  two  elements  of  absence  of  knowl- 
edge and  value  given  must  concur  to  make  the  holder's  equity  a  su- 
perior one.  And  taking  the  instrument  as  a  mere  security  or  in 
nominal  payment  of  a  pre-existing  debt  is  not  giving  value  for  it. 
Hence,  the  position  of  the  holder,  lacking  the  element  of  value  given, 

T  Bank  of  Metropolis  v.  New  England  Bank,  1  How.  234;  Barney  v.  Earle, 
13  Ala.  106:  BRUSU  v.  SCRIBNER,  11  Conn.  388;  Meadow  v.  Bird,  22  Ga. 
246;  Conkling  v.  Vail,  31  111.  166;  McKnight  v.  Knisely,  25  Ind.  336;  Homes 
V.  Smyth.  16  Me.  177;  Blanchard  v.  Stevens,  3  Cush.  162;  Thacher  v.  Pray, 
113  JIass.  291;  OUTHWITE  v.  PORTER,  13  Micli.  533;  Stevenson  v.  Hyland, 
11  Minn.  198  (Gil.  128);  Struthers  v.  Kendall,  41  Pa.  St.  214;  Dixon  v.  Dixon, 
31  Vt.  450.  See,  also,  Bridgeport  Bank  v.  Welch,  29  Conn.  475;  Manning  v. 
McClure,  36  III.  490;  Washington  Bank  v,  Lewis,  22  Pick.  24;  FISHER  v. 
FISHER,  98  Mass.  303;  Armour  v.  McMichael,  36  N.  J.  Law,  92;  Cobb  v. 
Doyle,  7  R.  I.  350;  Newman  v.  Aultman,  Miller  &  Co.  (Tenn.)  51  S.  W.  198. 
In  the  case  of  CURRIE  v.  MISA,  L.  R.  10  Exch.  153,  it  was  held  that  the  title 
of  a  creditor  to  a  negotiable  security  given  to  him  on  account  of  a  pre-existing 
debt,  and  received  by  him  bona  fide  and  without  notice  of  any  infirmity  of  title 
on  the  part  of  the  debtor,  is  indefeasible,  whether  that  security  be  payable  at 
a  future  time  or  on  demand.  In  the  case  of  FRANCIA  v.  JOSEPH,  3  Edw.  Ch. 
(N.  Y.)  182,  it  was  held  that  where  a  note  was  given  to  A  to  get  It  discounted, 
and  he  gave  it  to  B  in  payment  of  a  pre-existing  debt  of  his  own,  he  who 
took  the  note  could  not  hold  it  as  against  the  owner,  even  though  he  was  igno- 
rant of  the  manner  in  which  it  came  into  the  possession  of  A,  and  though  the 
note  was  received  as  a  consideration  for  his  forbearance. 


§  123-124)  VALUE.  313 

does  not  entitle  him  to  overthrow  the  defenses  which  other  parties 
may  interpose.*  There  must  be  value  given  or  allowed  on  his  part 
on  the  strength  of  the  identical  paper  on  which  the  action  is  brought 
to  make  the  holder  a  purchaser  for  value."  The  comparative  equi- 
ties of  prior  parties  and  the  holder  turn  upon  this  point.  In  case 
of  payment  the  question  is  whether  he  has  taken  the  instrument  in 
nominal  payment,  without  other  evidence  of  intention  to  discharge 
it  than  the  ordinary  business  transaction  of  accepting  it,  or  receipt- 
ing it  in  payment,  or  crediting  it  on  account.  In  each  of  these  latter 
cases  he  stands  in  the  position  he  held  before  receipt  of  the  paper, 
with  the  added  property  of  the  paper  in  his  hands,  for  which  he 
has  neither  given  nor  suffered  anything.  His  right  to  proceed  upon 
the  original  indebtedness  after  the  maturity  of  the  paper  is  unim- 
paired. And  equity  will  not  tolerate  his  holding  the  additional  pa- 
per to  the  prejudice  of  those  parties  who  have  prior  rights  or  de- 
fenses which  render  his  claim  a  wrongful  one.  Hence,  the  rule  is 
established  in  many  states,  in  contradiction  to  the  wiser  theory  of 
Judge  Story,  that  one  who  receives  paper  before  it  is  due,  without 
any  notice  or  knowledge  of  any  fraud  in  its  inception  or  transfer, 
but  for  a  precedent  debt,  and  without  parting  with  any  value  or 
valuable  consideration,  does  not  acquire  a  valid  title  to  the  paper,  but 
takes  it  subject  to  all  its  infirmities.***  The  courts  who  have  adopted 
this  position  have,  however,  confined  the  scope  of  the  rule  to  narrow 
limits.  If  it  appears  that  the  holder  has  in  any  wise  given  value 
for  the  transfer,  his  title  has  been  supported.  This  has  given  rise 
to  a  large  number  of  decisions  as  to  the  meaning  of  value  in  taking 
paper,  both  in  pa\Tnent  of  and  as  collateral  security  for  a  precedent 
debt,  which  may  be  approximately  **  classified  as  follows: 

(1)  Value  is  given  upon  transfer  when  the  instrument  is  transferred 

8  STALKER  V.  McDONALD.  6  Hill,  93.  In  this  case  It  was  held  that  where 
the  person  receiving  the  bill  has  taken  it  merely  in  payment  or  security  of  an 
antecedent  debt,  having  neither  parted  with  value  on  the  credit  of  it  nor  given 
up  a  previous  security,  he  will  not  be  entitled  to  hold  the  bill  against  the  for- 
mer rightful  owner,  in  case  of  an  unauthorized  transfer. 

»  BAY  v.  CODDIXGTON,  5  Johns.  Ch.  (N.  Y.)  54,  Johns.  Cas.  Bills  &  N.  183. 

10  rnOENIX  INS.  CO.  v.  CHURCH,  81  N.  Y.  218;  Comstock  v.  Hier,  73  N.  Y. 
2G9;    Turner  v.  Treadway,  53  N.  Y.  (550;    Weaver  v.  Barden,  49  N.  Y.  286; 


»i  The  term  "approximately"  Is  uaed  because  many  of  the  decisions  are  aj;>- 
patently  Irreconcilable. 


314  PURCHASER    FOR   VALUE   WITHOUT   NOTICE,  C^h.  & 

in  satisfaction  of  a  pre-existing  debt,  whether  it  is  in  whole  or  part 
payment  of  the  debt,^'  or  whether  the  instrument  surrendered  has 
matured,  or  is  not  yet  due.^"  This  is  because  the  creditor,  in  sur- 
rendering his  rights  under  the  old  debt  in  exchange  for  the  new  pa- 
per, parts  with  value.^* 

(2)  Value  is  given  upon  transfer  when,  at  the  time  thereof,  security 
is  surrendered  by  the  holder  in  consideration  of  the  receipt  by  him 
of  the  instrument  Such  a  holder  takes  the  instrument  free  from 
the  defenses  of  antecedent  parties,  to  the  extent  of  the  collaterals 
surrendered.^* 

The  situation  of  the  creditor  discharging  a  pre-existing  debt  or 
surrendering  securities  in  consideration  of  the  transfer  of  paper  to 
him,  from  a  legal  point  of  view,  is  not  similar  to  that  of  a  cred- 
itor receiving  paper  as  collateral  security  for  a  debt  due  from  the 
transferrer  to  him.  In  taking  the  paper  as  collateral  security,  the 
creditor  still  retains  all  his  rights  upon  the  original  indebtedness. 
The  paper  is  received  by  him  merely  to  further  assure  the  certainty 
of  the  recovery  of  his  debt.  He  may  or  may  not  recover  it  in  full, 
and  if  he  does  not  he  may  proceed  upon  his  collateral.  Therefore, 
in  weighing  the  comparative  equities  of  such  persons  and  those  from 
whom  the  paper  has  been  derived  through  wrong,  the  turning  point 
is  naturally  value.  This  renders  the  equity  superior  or  inferior  ac- 
cording as  it  has  or  has  not  been  given.  And  in  determining  the 
question,  the  cases  have  been  classified  as  follows: 

(1)  Where  the  debt  is  contracted  at  the  time  of  transfer  and  on 
the  faith  of  the  bill  or  note,  or  indorsement  of  a  third  party  as  col- 
Lawrence  V.  Clark,  36  N.  Y.  128;  Farrington  v.  Frankford  Bank,  24  Barb. 
554;  Moore  v.  Ryder,  65  N.  Y.  438;  Potts  v.  Mayer,  74  N.  Y.  594;  Rosa  v. 
Brotherson,  10  Wend.  85;  Payne  v.  Cutler,  13  Wend.  605;  Goggerly  v.  Cuth- 
bert,  2  Bos.  &  P.  (N.  R.)  170;  Evans  v.  Kymer,  1  Barn.  &  Adol.  528;  Jones  v. 
Fort,  9  Barn.  &  C.  764;  Wormley  v.  Lowry,  1  Humph.  468;  Ingham  v.  Vaden, 
8  Humph.  51;  Rhea  v.  Allison,  3  Head,  176;  Hickerson  v.  Ralguel,  2  Heisk.  329. 

12  CHRYST.ER  v.  RENOIS,  43  N.  Y.  209. 

15  Day  V.  Saunders.  1  Abb.  Dec.  495;   Youngs  v.  Lee,  12  N.  Y.  551. 

14  Mayer  v.  Heidelbach,  123  N.  Y.  332,  25  N.  E.  416;  American  Exch.  NaL 
Bank  v.  New  York  B.  &  P.  Co.,  74  Hun,  446,  26  N.  Y.  Supp.  822;    WARD  v. 

16  Goodwin  v.  Conklin,  85  N.  Y.  21;  PHOENIX  INS.  CO.  v.  CHURCH,  81  N. 
Y.  218;  Park  Bank  v.  Watson,  42  N.  Y.  490;  BANK  OF  SALINA  v.  BAB- 
COCK.  21  Wend.  499. 


§  123-124)  VALUE.  315 

lateral  security,  that  debt  Itself  forms  a  part  of  the  consideration  of 
the  transfer  and  constitutes  value.  This  is  because  the  holder  may 
be  supposed  to  part  with  his  property  upon  the  faith  not  only  of  the 
principal  instrument,  but  also  of  the  instrument  put  up  as  collateral. 
The  two,  as  elements  of  the  consideration,  are  inseparable.  The 
courts  will  not  inquire  whether  the  holder  parted  with  value  because 
of  the  original  or  because  of  the  collateral  paper.  They  consider 
such  value  given  for  both.^" 

(2)  Where  the  instrument  is  accommodation  paper,  that  fact  is 
no  defense  to  a  holder  who  receives  it  as  collateral  to  a  pre-existing 
debt.  This  is  because  the  delivery  of  the  instrument  as  collateral 
is  in  furtherance  of  the  purpose  of  the  accommodation,  which  was 
to  obtain  credit.  The  equity  of  the  holder,  who  so  takes  it,  is  there- 
fore superior  to  that  of  the  accommodation  party  who  gives  it.^'' 
But  the  reason  of  this  rule  ceases  to  apply,  and  the  rule  itself  is 
otherwise,  when  the  instrument  has  been  diverted  or  procured 
through  fraud.^' 

(3)  Where  the  pre-existing  debt  has  fallen  due,  and  there  is  a 
transfer  of  a  bill  or  note  as  collateral  security  with  an  express  agree- 
ment for  delay.  The  forbearance  is  a  sufiBcient  consideration.  This 
is  because  such  forbearance  is  a  surrender  by  the  holder  of  his  val- 
uable right  of  immediate  prosecution.^*  But  the  rule  only  applies 
for  the  reason  that  the  holder,  by  valid  agreement,  has  estopped  him- 
self from  .prosecuting.  If,  therefore,  the  agreement  is  invalid,  and 
there  is  no  legal  reason  why  the  holder  should  not  prosecute,  the 

HOWARD,  88  N.  Y.  74;  CHRYSLER  v.  RENOIS,  43  N.  Y.  209;  BROWN  v. 
LEAVITT,  31  N.  Y.  113;  Youngs  v.  Lee.  12  N.  Y.  551;  MIX  v.  NATIONAL 
BANK  OF  BLOOMINGTON,  91  111.  20;  BARDSLEY  v.  DELP,  88  Pa.  St.  420; 
Norton  v.  Waite,  20  Me.  175;  BRUSH  v.  SCRIBNER,  11  Conn.  388;  Dixon  v. 
Dixon.  31  Vt.  450;  Kellosj?  v.  Fancher,  23  Wis.  21;  McKnight  v.  Knisely,  25 
Ind.  336;   Mayberry  v.  Morris,  62  Ala.  116. 

i«  Bank  of  New  York  v.  Vanderhorst,  32  N.  Y.  553;  Bank  of  Chenango  v. 
Hyde.  4  Cow.  567;   WILLIAMS  v.  SMITH,  2  Hill   (N.  Y.)  301. 

IT  CONTLXENTAL  NAT.  BANK  v.  TOWNSEND,  87  N.  Y.  8;  GROCERS' 
BANK  V.  PENFIELD.  69  N.  Y.  502;    Scliepp  v.  Carpenter,  51  N.  Y.  602. 

i«  Schepp  V.  Carpenter,  51  N.  Y.  602;  Spencer  v.  Ballon,  18  N.  Y.  331;  Bank 
of  Rutland  v.  Buck,  5  Wend.  66. 

19  Mcfhanics'  &  F.  Bank  v.  Wixson,  42  N.  Y.  438;  Traders'  Bank  v.  Brad- 
nor.  I.".  Bail).  379;  BURNS  V.  ROWLAND,  40  Barb.  (N.  Y.)  30S;  Watson  v, 
Uaudall.  20  Weud.  201. 


316  PURCHASER    FOR    VALUE    WITHOUT    NOTICE.  (Ch.   8 

receipt  of  the  paper  is  upon  a  consideration  which  is  worthless  in 
law,  and  the  holder  is  deemed  to  have  given  no  value.*' 

(4)  In  addition  to  those  rules  are  the  principles  already  discussed, 
which  apply  to  the  position  of  the  holder  taking  the  instrument  as 
collateral,  as  well  as  when  he  takes  it  in  payment.  They  are  (a) 
where  the  note  is  received  in  payment  of  one  then  surrendered  and 
canceled,  or  in  absolute  payment,  (b)  and  where  securities  are  sur- 
rendered. . 

The  principles  upon  which  the  title  of  the  holder  of  collateral  se- 
curity rests  regulate  also  the  amount  which  may  be  collected  out  of 
it.  The  holder,  taking  paper  as  collateral,  can  only  recover  upon  it 
to  the  amount  of  the  loss  which  he  suffers  upon  the  original  paper; 
that  is  to  say,  the  amount  for  which  the  paper  is  itself  put  up  as 
collateral. ^^  If  the  principal  paper  is  entirely  worthless,  and  in 
amount  equal  or  in  excess  of  the  paper  put  up  as  collateral,  then 
he  may  recover  the  entire  amount  of  the  collateral;  but  otherwise, 
it  is  only  what  he  loses  on  the  principal  paper  which  can  measure 
his  damages.^'^  The  amount  which  a  purchaser  who  has  paid  less 
than  the  face  value  may  recover,  however,  depends  upon  other  con- 
siderations. It  is  clear  that  it  would  impair  the  utility  of  commer- 
cial paper  as  a  medium  of  exchange  if  the  maker  or  acceptor  could 
interpose  even  a  partial  defense  against  a  bona  fide  purchaser,  and 
could  prevent  him  from  recovering  the  face  value  of  the  instrument, 
because  of  fraud  or  other  circumstances  in  its  inception,  which 
would  have  been  available  between  the  original  parties;  and  many 
courts,  including  the  supreme  court  of  the  United  States,  hold  that 

20  Atlantic  Nat.  Bank  of  New  York  v.  Franklin,  55  N.  Y.  235. 

21  Where  a  promissory  note  has  been  transferred  before  maturity  by  way 
of  collateral  security  for  future  indorsements  to  be  made  to  the  transferee, 
which  are  afterwards  made  to  him,  the  transferee  is  to  be  treated  as  a  bona 
fide  holder.  He  cannot  recover  upon  the  note  beyond  the  amount  of  the  in- 
dorsements it  was  designed  to  secure  the  holder  against  Williams  v.  Smith, 
2  Hill  (N.  Y.)  301. 

22  Park  Bank  v.  Watson,  42  N.  Y.  490;  Piatt  v.  Beebe,  57  N.  Y.  339;  Huff  v. 
Wagner,  63  Barb.  215;  Cardwell  v.  Hicks,  37  Barb.  458;  Duncan  v.  Gilbert, 
29  N.  J.  Law,  527;  Atlas  Bank  v.  Doyle,  9  R.  I.  76;  Maitland  v.  Citizens'  Nat. 
Bank.  40  Md.  540;  Mechanics'  &  Traders'  Bank  v.  Bamett,  27  La.  Ann.  177; 
Brown  v.  Callaway,  41  Ark.  420;  Bell  v.  Bean,  75  CaL  87,  16  Pac.  521.  Sep 
>.'eg,  Inst  L.  §  53. 


§§125-127)  NOTICE.  317 

a  purchaser  may  recover  the  full  amount,  though  he  may  have  paid 
less  than  the  face  value,  whatever  the  equities  between  the  original 
parties.^'  Such  also  is  the  rule  as  declared  by  the  Negotiable  In- 
struments Law.^*  On  the  other  hand,  other  courts  have  held  that 
equity  will  not  give  the  purchaser  the  benefit  of  a  speculative  bar- 
gain, but  will  only  protect  the  purchaser  to  the  extent  of  his  loss.^'' 
In  conclusion  it  is  to  be  pointed  out  that  the  New  York  rule  that  a 
pre-existing  debt  is  not  a  consideration  sufficient  to  constitute  the 
holder  a  boaa  fide  purchaser  for  value  has  been  abolished  in  that 
state  by  the  enactment  of  the  Negotiable  Instruments  Law,  which 
provides  that  "an  antecedent  or  pre-existing  debt  constitutes  value, 
and  is  deemed  such  whether  the  instrument  is  payable  on  demand  or 
at  a  future  time."  '• 

NOTICE. 

125.  Notice  Is  either  actual  or  constructive. 

126.  ACTUAL  NOTICE— Means  either  knowledge  or 
means  of  kno^w'ledge  to  ■which  the  purchaser  dishonestly 
shuts  his  eyes. 

127.  CONSTRUCTIVE  NOTICE— Means  knowledge  to 
be  derived  from  the  face  of  the  instrument.  The  pur- 
chaser is  charged  -with  notice  of  Tvhatever  appears  there- 
on. 

2  8  Cromwell  v.  County  of  Sac,  96  U.  S.  60;  Florida  Cent.  R.  Co.  v.  Schutte, 
103  U.  S.  118;  LAY  v.  WISSMAN,  36  Iowa,  305;  KITCHEN  v.  LOUDENBACK, 
48  Ohio  St.  177,  26  N.  E.  979 

24  Section  96. 

26  HOLCOMB  V.  WYCKOFF,  35  N.  J.  Law.  35;  Huff  v.  Wagner,  63  Barb. 
(N.  Y.)  215;  Harger  v.  Wilson,  Id.  237;  Oppenheimer  v.  Farmers'  &  M.  Bank,  97 
Tenn.  19,  36  S.  W.  705.  Mr.  Daniel  supports  this  view.  Daniel,  Neg.  Inst.  §§ 
757-758C.  The  decisions  are  collected  in  4  Am.  &  Eng.  Ene.  Law,  346.  Even 
In  this  view  a  distinction  may  properly  be  drawn  in  case  of  accommodation 
paper.    Daniels  v.  Wilson,  21  Minn.  530;  ante,  p.  182. 

28  Section  51.  Under  this  section  an  indorsee  of  a  note  taken  as  collateral  to 
a  pre-existing  Indebtedness  is  a  holder  for  value,  unaffected  by  equities  betweeu 
the  original  parties.  Brewster  v.  Shrader,  26  Misc.  Rep.  480,  57  N.  Y.  Supp. 
606.     See,  also,  Rosenwald  v.  Goldstein  (City  Ct  N.  Y.)  57  N.  Y.  Supp.  2^. 


i?18  PURCHASER    FOR    VALUE    WITHOUT    NOTICE.  (Ch.   8 

The  second  cleniont  necessary  to  support  the  title  of  the  pur- 
chaser to  the  instrument  is  that  it  must  be  without  notice.  This, 
like  the  doctrine  of  value,  rests  upon  the  principles  of  equity.  It  is 
a  lonjx-established  equity  precedent  that  when  several  different  and 
successive  claims  upon  the  same  subject-matter  exist,  and  there  is 
a  contest  between  the  owners  of  these  interests,  the  person  who 
acquires  a  right  to  the  property  with  knowledge  that  another  person 
has  already  a  claim  to  it  is  deemed  to  take  it  subject  to  that  claim. 
The  first-named  person  has  the  superior  right  to  the  property,  while 
the  last-named  person  owns  in  subordination  to  this  right.  Lord 
Ilardwicke  has  explained  the  reason  to  be  that  "the  taking  of  a 
legal  estate  after  notice  of  a  prior  right  makes  a  person  a  mala  fide 
purchaser.  "This,"  he  says,  "is  a  species  of  fraud  and  dolus  mains 
itself;  for  he  knew  the  first  purchaser  had  the  clear  right  of  the  es- 
tate, and,  after  knowing  that,  he  takes  away  the  right  of  another 
person  by  getting  the  legal  estate.  Now,  if  a  person  does  not  stop 
his  hand,  but  gets  the  legal  estate  when  he  knew  the  right  was  in 
another,  machiuatur  ad  circumveniendum."  ^^  Or,  in  other  words, 
to  express  the  principle  in  the  language  of  our  later  day,  and  to 
apply  it  to  the  subject-matter  of  bills  and  notes,  the  rule  is  that 
when  a  purchaser  takes  a  bill  or  note  by  negotiation,  without  any 
knowledge  of  the  equities  of  prior  parties,  he  takes  it  on  an  inde- 
pendent title  by  the  negotiation,  and  will  not  be  affected  by  these 
equities,  because  he  is  not  in  privity  with  such  prior  party,  does  not 
chiim  under  him,  and  is  not  bound  by  his  acts,  frauds,  or  admis- 
sions.'^® But  if  he  has  knowledge  of  these  things  at  the  time  of 
the  purchase  of  the  instrument,  and  is  privy  to  them,  then,  because 
of  his  knowledge,  his  title  must  be  in  subordination  to  their  rights. 

»7  Le  Neve  v.  r>e  Neve,  2  Amb.  436. 

as  Fisher  v.  Leland,  4  Cush.  (Mass.)  456.  In  the  opinion  delivered  by  Shaw, 
O.  J.,  In  this  case,  he  held  that,  "when  an  Indorsee  takes  a  bill  or  note,  by 
indorsement,  before  it  is  due,  and  without  notice  of  fraud  or  other  matter  of 
defense,  he  takes  it  on  an  independent  title  by  the  indorsement,  and  will 
not  be  affected  by  any  payment,  set-off,  fraudulent  consideration,  or  other 
matter  of  defense,  which  the  acceptor  or  promisor  might  have  had  against 
any  previous  party."  JOHNSON  v.  WAY,  27  Ohio  St.  374,  Johns.  Cas  Bills  & 
N.  185.  As  holding  that  an  attachment  is  unavailable  against  a  bona  fide 
holder  for  value  of  negotiable  paper  who  obtains  it  after  attachment  before 
maturity,  and  without  notice,  see  KIEFFER  v.  EHLER,  18  Pa.  St.  388. 


§§  125-127)  NOTICE.  319 

This  is  the  fundamental  reason  for  the  effect  of  notice  upon  the  title 
of  the  purchaser;  and  accordingly  we  find  "notice"  defined  as  ''the 
information  concerning  a  fact,  actually  communicated  to  a  party, 
by  an  authorized  person,  or  actually  derived  by  him  from  a  proper 
person,  or  else  presumed  by  law  to  have  been  acquired  by  him, 
which  information  is  regarded  as  equivalent  in  its  legal  effects  to 
full  knowledge  of  the  fact,  and  to  which  the  law  attributes  the  same 
consequences  as  would  be  imputed  to  knowledge."  ^®  And  in  our 
examination  of  the  question  of  notice,  we  shall  direct  our  inquiry  to 
the  facts  and  rules  which,  according  to  the  law  merchant,  charge  the 
purchaser  with  knowledge  of  the  equities  of  prior  parties,  and  make 
his  title  subject  to  these  equities. 

Xotice  may  be  actual  or  constructive.  Under  the  classification  here 
adopted,^"  actual  notice  means  not  merely  knowledge,  but  means  of 
knowledge  to  which  the  party  willfully  shuts  his  eyes.^^  In  the  degree 
of  knowledge  necessary  to  be  possessed  by  the  purchaser  to  charge  him 
with  notice,  the  law  merchant  departs  from  the  rules  of  equity.  In 
equity  jurisprudence  notice  may  be  knowledge  of  any  fact  sufficient 
to  put  a  prudent  man  upon  inquiry  as  to  the  existence  of  some  right  or 
title  in  conflict  with  that  he  is  about  to  purchase.  Such  knowledge  be- 
ing shown,  the  court  presumes  the  purchaser  either  to  have  made  the 
inquiry  or  else  holds  him  guilty  of  negligence  equally  fatal  to  his  claim 
to  be  considered  a  bona  fide  holder.  It  is  the  duty  of  each  purchaser 
of  other  property,  if  facts  are  brought  directly  home  to  him  such  as 
would  put  a  reasonably  prudent  man  upon  his  guard,  to  prosecute 
an  inquiry.  And  if  the  facts  of  defense,  existing,  but  latent,  would 
have  been  discovered  if  the  investigation  of  the  purchaser  had  been 
pursued  to  its  natural,  logical  end,  then  the  purchaser,  if  he  did  not 
pursue  the  inquiry,  cannot  be  deemed  to  have  taken  his  title  in  good 
faith.^*  This  doctrine  the  law  merchant  rejects.  And  it  is  now 
the  rule  of  the  law  merchant  that  mere  knowledge  of  any  facts  sufii- 
cient  to  put  a  reasonably  prudent  man  on  inquiry  is  not  sufficient, 

»»  Pom.  Eq.  Jur.  §  594. 

«o2  Ames,  Cas.  Bills  &  N.  868.  It  Is  to  be  noted  that  "constructive  notice" 
is  sometimes  used  with  a  broader  meaning  than  that  here  given,  po  as  to 
include  means  of  knowledge  whether  to  be  derived  from  the  face  of  the  in- 
Btrument  or  from  other  sources. 

81  May  V.  Chapman,  IG  Mees.  &  W.  3.05. 

»2  Williamson  v.  Brown,  15  N.  Y.  354. 


320  PURCHASER    FOR    VALUE    WITHOUT    NOTICE.  (Ch.   8 

but  that  to  defeat  his  claim  to  be  considered  a  bona  fide  holder  he 
must  be  guilty  of  bad  faith."  Actual  mala  fides  must  be  shown  to 
the  satisfaction  of  the  jury  to  deprive  a  holder  for  value  of  the  char- 
acter of  bona  fide  holder,'*  and  negligence  in  not  inquiring  into 
facts  which  ought  to  have  put  him  on  inquiry  is  not  sufficient. 
Gross  carelessness,  even,  on  the  part  of  the  holder  is  not  conclusive 
of  notice,  though  it  is,  of  course,  perfectly  competent  evidence  to  go 
to  the  jury  on  the  question  of  bad  faith.^"  So  that  in  case  of  bills 
and  notes  the  purchaser  for  value  is  not  bound,  at  his  peril,  to  be 
on  the  alert  for  circumstances  which  might  possibly  excite  the  sus- 
picions of  a  wary,  vigilant  man.''     He  does  not  owe  to  the  party 

»»  The  test  of  bona  fidea  has  varied  greatly.  "Previous  to  1820  the  law 
was  much  as  It  is  at  present,  but  under  the  influence  of  Lord  Tenterden  due 
care  and  caution  was  made  the  test.  GILL  v.  CUBIT,  3  Bam.  &  C.  466. 
In  1S34  the  liing's  bench  held  that  nothing  short  of  gross  negligence  would 
defeat  the  title  of  a  holder  for  value.  CROOK  v.  JADIS,  5  Barn.  &  Adol. 
909.  Two  years  later  Lord  Denman  states  it  as  settled  law  that  bad  faith 
alone  could  disentitle  a  holder  for  value.  Gross  negligence  might  be  evidence 
of  bad  faith,  but  was  not  conclusive  of  it.  GOODilAN  v.  HARVEY,  4 
Adol.  &  E.  870.  This  principle  has  never  been  shaken  In  England,  and  it 
seems  now  finally  established  in  America."  BenJ.  Chalm.  Bills  &  N.  102, 
note;  Backhouse  v.  Harrison,  5  Bam.  &  Adol.  1098;  MAGEE  v.  BADGER, 
34  N.  Y.  247;  Belmont  Branch  of  State  Bank  v.  Hoge,  35  N.  Y.  65;  Parker 
V.  Conner,  93  N.  Y.  118.  Such  is,  in  substance,  the  provision  of  Neg.  Inst. 
L.  §  95. 

«*  "The  proper  inquiry  Is,  did  the  party  seeking  to  enforce  the  payment 
have  knowledge,  at  the  time  of  the  transfer,  of  the  facts  and  circumstances 
which  impeach  the  title,  as  between  the  antecedent  parties  to  the  instru- 
ment? And,  if  the  jury  finds  that  he  did  not,  then  he  is  entitled  to  recover, 
unless  the  transaction  was  attended  by  bad  faith,  even  though  the  instru- 
ment had  been  lost  or  stolen."  Clifford,  J.,  In  GOODMAN  v,  SEVIOXDS,  20 
How.  343. 

8  6Canajoharie  Nat.  Bank  v.  Diefendorf.  123  N.  Y.  191,  25  N.  E.  402;  Sey- 
bel  v.  National  Currency  Bank,  54  N.  Y.  288. 

88  "An  individual  negotiating  for  the  purchase  of  a  bill  or  note  from  one 
having  It  In  possession,  and  whose  name  appears  upon  it,  must  assume  that 
the  title  of  the  holder,  as  well  as  the  liability  of  all  the  parties,  is  precisely 
that  indicated  by  the  Instrument;  that  is,  he  cannot  assume  that  the  person 
In  possession  has  any  other  or  different  rights,  or  that  the  liability  of  the 
parties  Is  other  or  different  from  that  which  the  law  would  imply  from  the 
form  or  character  of  the  instrument."  Per  Curiam  in  Central  Bank  v.  Ham- 
mett,  50  N.  Y.  ISa 


§§  125-127)  NOTICE.  321 

who  puts  negotiable  paper  afloat  the  duty  of  active  inquiry  to  avert 
the  imputation  of  bad  faith.  And  the  speculative  issue  of  his  dili- 
gence or  negligence  does  not  enter  into  the  question.  The  question 
is  one  simply  of  good  faith  in  the  purchaser;  and,  unless  the  evi- 
dence makes  out  a  case  upon  which  the  jury  would  be  authorized  to 
find  fraud  or  bad  faith  in  the  purchaser,  it  is  the  duty  of  the  court 
to  direct  a  verdict  for  the  holder.''^ 

Constructive  notice  is  a  legal  inference  from  established  facts. 
When  the  alleged  defect  appears  on  the  face  of  the  instrument,  and 
is  a  mere  matter  of  ocular  inspection,  the  question  becomes,  not  one 
of  fact  for  the  jury,  but  of  law  for  the  court.  The  court  determines 
whether  these  conceded  facts  constitute  in  themselves  notice.^'  If 
80,  the  notice  is  not  actual,  but  constructive.  In  taking  such  instru- 
ments the  purchaser  is  charged  with  knowledge  of  the  defect,  wheth- 
er he  knows  of  it  or  not.     Instances  of  this  are  a  restrictive  ^®  or  a 

87  In  the  case  of  LAWSON  v.  WESTON,  4  Esp.  56,  it  was  shown  that  a 
bill  indorsed  in  blank  had  been  lost,  and  the  loser  had  advertised  it  in  the  news- 
paper. The  bill  was  discounted  by  the  plaintiffs  for  the  finder,  who  was  unknown 
to  them.  It  was  held  that  the  plaintiffs  could  recover  if  they  acted  in  good 
faith,  and  that  they  were  not  bound  to  make  inquiries.  MAGEE  v.  BAD- 
GER, S4  N.  Y.  247;  Welch  v.  Sage,  47  N.  Y.  147;  GOODMAN  v.  SIMONDS,  20 
How.  (U.  S.)  343;  BANK  OF  PITTSBURGH  v.  NEAL,  22  How.  (U.  S.)  99; 
MURRAY  v.  LARDNER,  2  Wall.  (U.  S.)  110;  Comstock  v.  Hannah,  76  111. 
530;  Spitler  v.  James,  32  Ind.  202;  Worcester  Co.  Bank  v.  Dorchester  &  M. 
Bank,  10  Gush  488;  Spooner  v.  Holmes,  102  Mass.  503;  MILLER  v.  FINLEY, 
26  Mich.  249;  CROSBY  v.  GRANT,  36  N.  H.  273;  JOHNSON  V.  WAY,  27 
Ohio  St.  374;   PHELAN  v.  MOSS,  67  Pa.  St.  59. 

38  Birdsall  v.  Kusst-11.  29  N.  Y.  220;    Claflin  v.  Lenheim.  66  N.  Y.  .Wl. 

«•  See  supra,  pp.  124-127;  ANCHER  v.  BANK  OF  ENGLAND,  2  Doug.  63. 
In  this  case  a  bill  was  drawn  by  A  on  B,  payable  to  C  or  order,  and  in- 
dorsed by  C,  thus:  "The  within  must  be  credited  to  D,  value  in  account." 
D  being  indebted  to  B,  and  the  bill  being  sent  to  B,  and  accepted  by  him, 
and  he  having  given  D  notice  that  he  had  received  it  and  placed  it  to  D's 
account,  it  was  held  that  this  was  such  a  special  indorsement  as  to  restrain 
the  negotiability  of  the  bilL  Should  a  forged  Indorsement  be  afterwards 
written  upon  it,  purporting  to  be  by  D  to  pay  to  E  or  order,  and  the  bill  be 
discounted,  the  one  discounting  must  bear  the  loss.  TREUTTEL  v.  B.VR- 
ANDON,  8  Taunt.  100.  A  bill  drawn  in  America  on  a  Lomlon  bouse,  i);iy- 
able  to  order,  was  indor.sed  by  payee  generally  to  A,  and  by  him  thus:  "I'ny 
to  B,  or  bis  order,  for  my  use."  B  applied  to  his  bankers  to  discount  tlie 
bill,  w^hich  they  did  without  inquiry,  and  applied  the  proceeds  to  the  use 
of  B.  It  was  held  that  the  indorsement  was  restrictive,  and  that  the  prop- 
NEG.BILLS.— 21 


322  PURCHASER  for  value  without  notice.  (.Ch.  8 

couditioiial  *°  indorsement,  which  being  on  the  face  of  the  instru- 
ment, the  purchaser  must  take  at  his  peril.  Another  example  is  paper 
which  shows  on  its  face  that  there  is  something  irregular  or  wroug 
about  it."  So  where  paper  bears  the  irregular  indorsement  of  a 
firm,  thereby  indicating  that  the  indorsement  was  for  accommoda- 
tion.*'' In  all  such  circumstances  it  is  a  part  of  the  legal  duty  of 
the  purchaser  to  inquire  and  ascertain  concerning  the  facts  of  which 
the  face  of  the  bill  or  note  gives  hira  notice.*"     If  he  fails  to  make 

erty  In  the  bill  remained  in  A,  who  could  recover  Its  amount  from  the  bank- 
ers. LLOYD  V.  SIGOURNEY,  5  Bing.  525.  In  BUCKI^Y  v.  JACKSON,  L. 
R.  3  Exch.  135,  it  was  held  that  an  indorsement  of  a  bill  of  exchange,  "Pay 
J.  S.,  or  order,  value  in  account  with  H.  C.  D.,"  was  not  restrictive.  An  in- 
dorsement of  a  note  without  recourse  does  not  affect  its  negotiable  quality. 
EPLER  V.  FUNK,  8  Pa.  St  468.  As  to  the  effect  of  imfilled  blanks  as 
notice,  see  ante,  p.  258. 

40  ROBERTSON  v.  KENSINGTON,  4  Taunt.  30. 

♦  1  MILLER  V.  CRAYTON,  3  Thomp.  &  0.  (N.  Y.)  3G0. 

42  West  St.  Louis  Sav.  Bank  v.  Bank,  95  U.  S.  557;  NATIONAL  BANK  v. 
LAW,  127  Mass.  72;  ante,  p.  182.  Thus,  since  "there  is  no  implied  authority  for 
one  member  to  indorse  or  affix  the  name  of  the  firm  to  negotiable  paper,  in  which 
the  partnership  has  no  interest  [for  third  persons]  *  ♦  *  the  holder  of 
such  paper  so  indorsed,  who  takes  it  with  notice  that  the  indorsement  was 
made  for  the  accommodation  of  the  maker,  cannot  hold  the  firm  liable. 
•  •  •  The  partners  are  liable  to  a  bona  fide  bolder  without  notice,  in  such 
case,  only  because  he  has  the  right  to  presume  that  the  indorsement  was 
made  in  the  usual  covu-se  of  the  partnership  business."  FIELDEN  v.  LA- 
tlENS,  2  Abb.  Dec.  111.  But  though  a  partner  may  not  sign  the  firm  name 
to  paper  for  payment  of  his  own  debt,  and  a  note  so  made  by  him  and  pay- 
able to  the  debtor  would  put  him  upon  inquiry  whether  it  was  made  with 
authority,  a  purchaser  is  not  charged  with  notice  that  the  firm  name  was 
wTongfully  used  where  he  purchases  a  note  made  In  the  firm  name  to  the 
order  of  one  partner,  who  transfers  it  for  his  own  debt,  since  there  is  nothing 
upon  the  face  of  the  paper  inconsistent  with  its  having  been  duly  issued  to 
such  partner.  Ridley  v.  Taylor,  13  East,  175.  In  CHEEVER  v.  RAILROAD 
CO.,  150  N.  Y.  50,  44  N.  E.  701,  where  a  note  duly  executed  on  the  part  of  a 
coi^poration,  and  signed  in  its  name  "By  M.  S.  Frost,  President,"  was  indorsed 
by  the  payee  to  "M.  S.  Frost  &  Son,"  and  negotiated  by  Frost  to  a  purchaser 
for  value,  it  was  held  that  there  was  nothing  on  the  face  of  the  paper  to  war- 
rant the  court  in  holding  that  he  received  It  mala  fide. 

43  Thus  in  F0WIJ5R  v.  BRANTLY,  14  Pet.  318,  it  was  held  that  a  note 
overdue,  or  bill  dishonored,  is  a  circumstance  of  suspicion,  to  put  those  dealing 
for  it  afterwards  on  their  guard. 


|§  125-127)  NOTICE.  323 

his  inquiry,  he  fails  in  his  full  legal  duty,  and  the  equities  of  the 
case  are  with  the  prior  parties,  who  are  allowed  to  interpose  them. 

These  definite  positions  were  not  arrived  at  until  after  many 
changes  in  the  law  as  it  was  from  time  to  time  administered.  And 
in  all  the  states  the  law  has  not  yet  developed  into  the  settled  posi- 
tions we  have  given,  regulating  the  degree  of  knowledge  to  be  pos- 
sessed by  the  holder  to  deprive  him  of  the  privileges  of  the  purchaser 
for  value  without  notice.  The  old  tests  are  applied,  which  are  not 
always  in  terms  whether  there  was  actual  notice  consisting  either 
of  direct  knowledge  of  the  defense  or  willful  ignorance  of  it  or 
whether  there  was  constructive  notice  of  the  facts.  The  question  is 
sometimes  whether  the  holder  was  a  bona  fide  transferee  or  a  pur- 
chaser in  the  due  or  usual  course  of  business.  But  these  tests  mean 
pretty  much  the  same  thing,  though  it  involves  a  classification  a 
little  less  exact. 

**Bona  fides  or  good  faith"  is  a  term  used  as  a  mere  distinction 
from  mala  fides  or  bad  faith.  If  paper  be  purchased  without  any- 
thing which  the  law  can  construe  into  notice,  it  is  spoken  of  as  be- 
ing purchased  in  good  faith.  Where,  on  the  contrary,  the  purchaser 
has  what  the  law  construes  to  be  notice  of  defects  or  equities,  then 
he  is  a  purchaser  in  bad  faith,  and  can  secure  to  himself  none  of  the 
advantages  given  to  the  bona  fide  purchaser.  But  bad  faith  means 
nothing  more  than  participation  in  the  fraud,  and  resolves  itself  into 
a  question  of  honesty  or  dishonesty,  for  guilty  knowledge  and  will- 
ful ignorance  alike  involve  the  result  of  bad  faith.**  "It  is  predicat- 
<*d,"  said  Chief  Justice  Church,  "upon  a  variety  of  circumstances, 
some  of  them  slight,  and  others  of  more  significance.  A  perfectly 
upright,  honest  man  might  sell  a  bond  which  had  been  stolen,  and  the 
-explanation  might  prevent  even  the  taint  of  wrong  on  his  part,  while 
the  explanation,  although  falling  far  short  of  proof  of  actual  guilt, 
might  leave  upon  the  mind  an  apprehension  that  he  either  directly 
or  impliedly  connived  at  the  wrong,  or,  at  least,  that  he  was  willing 
to  deal  in  securities,  and  keep  his  eyes  and  ears  closed,  so  that  he 
should  not  ascertain  the  real  truth."*"  Good  faith,  then,  is  absence 
of  knowledge  or  means  of  knowledge  on  the  part  of  the  purchaser 

**  MURRAY  v.  LARDNER,  2  Wall.  121. 

4»  Dutchess  C5o.  Mut  Ins.  Go.  v.  Hachfleld,  73  N.  Y.  228. 


324  PURCHASER    FOR    VALUE    WITHOUT    NOTICE.  (Ch.   S 

of  the  facts  which  constitute  the  defense  to  the  instrument.    It  is 
evidenced  by  the  facts  of  each  transaction. 

So  also  the  term  "due  or  usual  course  of  business"  means  "accord- 
ing to  the  usages  and  customs  of  commercial  transactions."  Nego- 
tiable paper  is  taken  in  the  regular  course  of  business  when  re- 
ceived in  transfer  in  the  manner  in  which  mercantile  paper  is  ordi- 
narily used,  and  when  a  business  man  would  ordiiiarily  have  re- 
ceived the  paper  under  the  circumstances  in  which  it  was  offered,, 
and  have  parted  with  his  property  for  it.*"  The  meaning  of  this 
expression  has  been  somewhat  discussed  by  the  courts  of  lowa.*^ 
The  view  of  those  courts  seems  to  be  that,  when  a  man  of  ordinary 
business  experience  would  have  been  willing  to  purchase  paper  cir- 
cumsta-nced  as  the  paper  was  in  the  cases  before  them  with  the  ex- 
pectation of  an  easy  and  safe  recovery,  it  was  taken  in  the  usual 
course  of  business.  Thus  neither  an  instrument  found  unindorsed 
in  the  hands  of  one  not  the  payee  and  transferred  by  such  holder^ 
nor  paper  which  is  overdue,  nor  a  draft  in  the  possession  of  the  ac- 
ceptor,** nor  a  bill  or  note  taken  by  operation  of  law  would  be  taken 
in  course  of  business.*"  For,  in  the  last  case,  to  acquire  title  by 
legal  process  is  not  in  the  regular  course  of  dealing  in  commercial 
paper.  The  transferee  pays  no  value  for  it.  He  can  only  be  deemed 
as  occupying  exactly  the  position  of  the  x>erson  from  whom  he  de- 
rived the  instrument,  because  he  is  in  law  his  representative.  It 
has  been  held  that  where  the  holder  has  offered  to  take  for  a  ne- 
gotiable instrument  a  sum  so  small  that  the  only  reasonable  inter- 
pretation could  be  that  there  is  something  wrong  about  it,  it  was 
willful  blindness,  and  an  abstinence  from  inquiry,  so  great  that  the 
court  would  treat  it  as  bad  faith.  The  reason  is  that  it  is  in  con- 
travention of  the  habit  of  business  men  to  sell  valuable  rights  for 
almost  nothing,  and  the  courts  deem  an  act  such  as  this  is  a  nec- 
essary implication  of  fraud.  But  a  modified  form  of  this  rule  as 
found  in  New  York  courts  is  probably  the  true  view."^"     It  appeared 

48  Edw.  Bills  &  N.  §  519. 

4T  Moore  v.  Moore,  39  Iowa,  461;  Iowa  College  v.  Hill,  12  Iowa,  462. 
«8  Central  Bank  of  Brooklyn  v.  Hammett,  50  N.  Y.  158. 
*»  BRIGGS  V.  MERRILL,  58  Barb.  (N.  Y.)  399. 

80  Vosburgh  v.  Diefendorf,  48  Ilun,  619,  1  N.  Y.  Supp.  58;  Richmond  v.  Die- 
fendorf.  51  Hun,  537,  4  N.  Y.  Supp.  375. 


§§  125-127)  NOTICE.  826 

from  the  evidence  that  notes  obtained  through  a  gross  swindle  were 
bought  for  half  price,  but  no  evidence  was  offered  of  the  good  faith 
of  the  plaintiff  in  buying  the  notes,  and  it  was  held  that  good  faith 
under  such  a  purchase  was  not  presumed,  but  the  plaintiff  must 
show  his  good  faith.  Soon  afterwards  the  same  point  came  up  in  a 
little  different  form,  and,  the  plaintiff  showing  by  the  evidence 
his  good  faith,  it  was  held  he  was  entitled  to  recover.  Thus,  the  New 
York  courts  hold  what  seems  the  wiser  doctrine,  that  the  small- 
ness  of  the  consideration  is  a  circumstance  of  suspicion  which  throws 
the  burden  of  proof  on  the  holder.  But  it  is  not  conclusive  evidence 
of  notice.  It  is  merely  evidence  which,  if  undenied,  will  destroy  the 
bona  fides  of  the  transaction.  And  it  is  for  the  jury  to  finally  de- 
cide whether  or  not  the  purchaser  had  such  knowledge  of  the  fraud 
that  his  purchase  of  the  instrument  was  a  participation  in  it."^ 

There  are  two  principles  to  be  added  to  the  discussion  of  the  gen- 
eral doctrine  of  notice.  They  are:  (1)  Notice  to  the  purchaser, 
actual  or  constructive,  mast  exist  at  the  time  of  the  acquirement 
of  the  paper  for  value,  and  that  (2)  notice  does  not  destroy  the  equi- 
ties of  a  purchaser  if  he  in  turn  is  the  transferee  of  a  purchaser  for 
value  without  notice.  In  regard  to  the  first  of  these  rules,  the 
element  of  value  detCi-mines  the  comparative  superiority  of  the  equi- 
ties of  the  purchaser  and  the  prior  party  suffering  through  fraud  or 
wrong.  For  unless  the  purchaser  has  parted  with  value  for  the  in- 
strument he  has  acquired,  he  is  in  no  worse  position  than  if  he  had 
not  acquired  the  instrument  at  all.  If,  therefore,  before  he  has 
parted  with  value,  he  receives  notice  of  the  defenses  of  a  prior  party, 
according  to  the  well-settled  doctrines  of  equity  already  referred  to 
he  takes  in  subordination  to  the  prior  party's  rights.  But  the  pay- 
ment of  a  valuable  consideration  changes  the  balance  of  the  equities 
in  his  favor,  and  his  right  to  a  superior  equity  becomes  fixed,  and 
can  be  at  all  times  asserted.  He  is  then  equipped  with  all  the  rights 
of  a  bona  fide  purchaser. "^^  And  so  it  is  that  knowledge  of  the' 
fraud  or  wrong  suffered  by  prior  parties  brought  home  to  the  pur- 
chaser after  the  transfer  to  him  for  a  valuable  consideration  can- 
si  Potts  V.  Mayer.  74  N.  Y.  594. 

B2  Weaver  v.  Barden.  49  N.  Y.  286;    De  Mott  v.  Starkey,  3  Barb.  Ch.  403; 
C'raudall  v.  Vlckery,  45  Barb.  IDS. 


326  PURCHASER    FOR    VALUE    WITHOUT    NOTICE.  (Cll.   S 


not  shake  the  title  he  has  acquired  on  his  purchase."'/  And  thia 
rule  goes  to  the  extent  that  if  a  valuable  consideration  is  partly  paid 
and  partly  unpaid,  the  purchaser  is  to  be  protected  to  the  amount 
which  he  has  in  good  faith  paid,"**  because  his  equity  is  to  that  ex- 
tent superior  to  that  of  the  prior  party.  The  reason  for  the  second 
rule  is  that  the  purchaser  for  value  without  notice,  when  he  trans- 
fers the  instrument,  transfers  without  reservation  all  the  rights  he 
had  in  it.  The  transferee  is  subrogated  to  all  these  rights.  And  if 
such  a  transferrer  could  have  maintained  an  action  upon  the  bill  or 
note,  the  purchaser  from  him  is  not  affected  by  notice  of  the  de- 
fenses of  prior  parties.  In  such  a  case  the  necessities  of  the  law 
merchant  prevail  over  the  doctrines  of  equity.  The  comparative 
rights  of  the  prior  party  and  the  holder  are  not  allowed  to  come  intO' 
question.  For  otherwise  the  right  of  the  bona  fide  holder  to  recover 
would  amount  to  a  property  consisting  of  a  right  which  he  could  not 
sell  and  transfer,  and  the  right  of  sale  and  transfer  is  one  of  the 
most  important  incidents  of  property.  Hence,  as  soon  as  the  paper 
comes  into  the  hands  of  a  holder,  unaffected  by  any  defect,  its  char- 
acter as  a  negotiable  security  is  established.  And  subsequent  no- 
tice of  that  defect  to  his  transferee  cannot  affect  the  right  of  action 
upon  the  paper  any  more  than  subsequent  notice  of  any  equity  to 
himself.'" 

53  Ho^e  V.  Lansing,  35  N.  Y.  136;  Howard  Banking  Co.  v.  Welchman,  6- 
Bosw.  (X.  Y.)  2S0;  Perkins  v.  White,  36  Ohio  St.  530;  WOODWORTH  v.  HUN- 
TOON,  40  111.  131,  Johns.  Gas.  Bills  &  N.  150. 

»♦  Dews  V.  Kidder,  84  N.  Y.  121;  DRESSER  v.  CONSTRUCTION  CO..  93  U. 
S.  93,  Jolins.  Cas.  Bills  &  N.  187.  This  was  a  case  where  partial  payment 
only  had  been  made  when  notice  of  fraud  was  given,  and  payment  prohibited. 
It  was  held  by  Justice  Hunt  that:  "The  case  before  us  is  governed  by  the 
rule  that  the  portion  of  an  unperformed  contract  which  is  completed  after 
notice  of  a  fraud  is  not  within  the  principle  which  protects  a  bona  fide  pur- 
chaser." Hubbard  v^.  Chapin,  2  Allen,  328;  LAY  v.  WISSMAN,  36  Iowa,  309, 
See  Neg.  Inst.  L.  §  93. 

66  Northampton  Nat.  Bank  v.  Kidder,  106  N.  Y.  221,  12  N.  E.  577;  Miller  v. 
Taleott.  54  N.  Y.  114;  Farmers'  &  Citizens'  Nat.  Bank  v.  Noxon,  45  N.  Y.  762; 
CHALMERS  v.  LANION,  1  Camp.  383.  This  was  an  action  by  the  second  in- 
dorsee against  the  acceptor  of  a  bill  of  exchange.  It  was  held  that  if  the 
person  who  indorsed  the  bill  to  the  plaintiff  could  himself  have  maintained? 
an  action  upon  it,  the  defendant  cannot  give  in  evidence  that  it  was  accepted 
for  a  debt  contracted  in  smuggling,  although  it  was  indorsed  to  the  plaiutifC 


§§  128-131)     PRESUMPTION  AND  BURDEN  OF  PROOF.  327 


PRESUBIPTION  AND  BURDEN  OF  PROOF— ORDER  OF  PROOF. 

128.  The  holder  of  a  bill  or  note  is,  in  the  first  instance, 
presumed  to  be  a  holder  for  value  and  -without  notice; 
but,  if  it  is  proved  on  the  trial  that  the  bill  or  note,  in 
its  issue  or  negotiation,  "was  affected  by  the  defenses  here- 
inafter specified,  it  is  incumbent  for  the  holder  to  prove 
that  he  is  such  a  purchaser. 

129.  The  usual  order  of  proof  on  a  trial  is: 

(a)  To  produce  the  paper  sued  on. 

(b)  To  prove  the  signatures  of  the  defendant  and 

of  all  persons  -whose  indorsement  is  neces- 
sary to  establish  the  plaintiff's  title. 

(c)  To  prove,  as  against  the  drawer  or  indorsers, 

presentment,  demand,  dishonor,  and  notice 
of  dishonor  to  them,  or  circumstances  to  ex- 
cuse these  acts. 

130.  Upon  proof  of  the  facts  specified  in  the  foregoing 
section,  the  holder  may  rest  for  his  recovery  until  evi- 
dence is  adduced  sho-wing: 

(a)  That  the  holder  -when  he  took  the  paper  had 

notice  of  the  equities. 

(b)  Or  that  there  -was  fraud,  duress,  or  illegality 

in  the  issue  or  subsequent  negotiation  of 
the  instrument. 

131.  Upon  proof  of  facts  specified  last  above,  the  pur- 
chaser must  show  that  he  or  some  person  under  -whom 
he  claims  -was  a  purchaser  for  value  -without  notice. 

after  it  had  become  due.  Masters  v.  Ibberson,  8  C.  B.  100;  May  v.  Chapman,  16 
Mees.  &  W.  355;  Commissioners  of  Marion  Co.  v.  Clarlc,  94  U.  S.  278;  Porter 
V.  Pittsburg  Bessemer  Steel  Co..  122  U.  S.  2G7,  7  Sup.  Ct.  1206;  SCOTI^ND 
CO.  V.  HILL.  132  U.  S.  117,  10  Sup.  Ct.  20;  Verbeck  v.  Scott,  71  Wis.  03.  30  N 
W.  GOO;  SHAW  v.  CLARK.  49  Mich.  384,  13  N.  W.  780;  SUFFOLK  SAV. 
BANK  V.  CITY  OF  BOSTON.  149  Mass.  305,  21  N.  E.  005;  Riley  v.  Shawacker, 
50  Iml.  592;  Mornyer  v.  Cooper,  35  Iowa,  257;  Ilascall  v.  Whltmore,  19  Me. 
102;  WOODWORTII  v.  IIUNTOON,  40  lU.  131;  BASSETT  v.  AVERY,  15  Ohio 
St  299.     See  Neg.  lust.  L.  a  97. 


328  PURCHASER    FOR    VALUK    WITHOUT    NOTICE.  (Ch.   3 

It  is  the  purpose  of  this  section  to  show  the  application  of  the 
rules  set  forth  in  this  and  the  foregoing  chapter  in  their  actual  ad- 
ministration in  courts  of  law.  These  two  chapters  have  attempted 
to  show  that,  where  negotiable  instruments  are  negotiated  to  a 
third  person,  certain  defenses  will  not  be  allowed  to  be  interposed 
against  him  in  his  action  upon  the  instrument,  provided  he  is  a  pur- 
chaser for  value  and  without  notice.  In  asserting  the  instrument 
as  a  legal  right,  and  enforcing  it  in  court,  these  principles  take  the 
form  of  presumptions  of  evidence."'  This  may  be  made  clearer, 
perhaps,  if  the  meaning  of  a  presumption  is  elaborated  by  show- 
ing its  application.  It  must  be  kept  in  mind  that  a  court  is,  so 
to  speak,  an  invention  or  machine  for  administering  justice;  and 
that  to  put  this  machine  in  motion  it  is  necessary  to  bring  the  facts 
constituting  a  wrong  to  the  notice  of  a  judge  and  jury  by  written 
evidence  or  the  sworn  testimony  of  persons  who  have  seen  or  known 
the  facts  to  be  proved.  If  these  facts  are  undenied,  or  controverted 
fsnd  proved,  the  court  then  administers  a  remedy.  But  this  the  court 
of  law  can  only  do,  and  the  machinery  of  justice  can  only  be  set  in 
motion,  when  the  facts  constituting  a  violated  right  are  brought 
before  it  by  competent  evidence.  Until  that  time  the  courts  sit  idly 
by,  awaiting  facts  demonstrating  affirmatively  that  some  one  has 
been  wronged.  These  facts  must  be  proved  in  extenso  by  the  per- 
son prosecuting  the  remedy,  or  the  plaintiff.  In  case  of  negotiable 
bills  and  notes,  most  of  the  affirmative  proof  necessary  to  establish 
other  kinds  of  contracts  is  unnecessary,  because  the  court,  upon  the 
production  of  the  instrument,  assumes  certain  facts  as  proved  suHi- 
ciently  to  entitle  the  plaintiff  to  judgment,  unless  the  defendant 
seeks  to  disprove  them.  So  that  in  the  first  stage  of  the  plaintiff's 
case  the  court,  upon  production  of  the  instrument,  assumes  as  prov- 
ed and  acts  upon  the  following  facts  as  true: 

(1)  That  there  was  a  sufficient  consideration  for  the  promise  or 
order  or  transfer,  whether  the  receipt  of  a  consideration  was  stated 
or  not.'^ 

»•  The  burden  and  order  of  proof  must,  of  course,  depend  upon  the  plead- 
ings and  the  Issue  raised.    Ordinarily,  the  declaration  or  complaint  is  upon  the 

6T  Olsen  V.  Ensign,  7  Misc.  Rep.  682,  28  N.  Y.  Supp.  38;  Bottum  v.  Scott,  11 
N.  Y.  St  Rep.  514;  Anthony  v.  Harrison,  14  Hun,  108,  affirmed  74  N.  Y.  613; 
Andrews  v.  Chadbourue,  19  Barb.  147. 


§§  128—131)  PRESUMPTION    AND    BURDEN    OF    PROOF.  329 

(2)  That  there  was  such  a  delivery  of  the  instrument  as  is  nec- 
essary to  its  legal  inception."* 

(3)  That  the  written  terms  of  the  instrument  state  the  facts  as 
therein  set  forth,  the  date  showing  the  time  of  execution  ''*  and  fix- 
ing the  time  of  payment;  *°  the  terms  of  payment  °*  both  as  to  its 
amount "'  and  as  to  its  place. 

(4)  Possession  by  the  holder  in  case  of  an  instrument  payable  to 
bearer,  or  indorsed  in  blank,  or,  in  case  of  an  indorsement  in  full, 
possession  by  the  indorsee,  presumes  title  upon  a  good  considera- 
tion." 

Instrameni;  itself,  raryiag  In  form  according  to  the  parties  by  or  against  whom 
the  action  is  brought.  The  declaration  describes  the  instrument,  and  sets  forth 
In  substance  how  the  defendant  became  a  party,  and  his  contract,  the  mode  by 
which  the  plalntiCf  derived  his  interest  in  and  right  of  action  on  the  instru- 
ment, and  the  breach  of  the  defendant's  contract.  Chit.  Bills  (8th  Ed.)  578.  At 
common  law,  in  an  action  between  immediate  parties,  It  was  usual  to  de- 
clare not  only  on  the  instrument  itself,  but  also  on  the  original  consideration; 
the  practice  being  to  declare  on  the  money  counts,  and  give  the  instrument 
in  evidence  under  them,  if  adapted  to  the  consideration.  But  this  did  not  apply 
where  there  was  no  privity  between  the  plaintiff  and  the  defendant,  as  between 
Indorsee  and  acceptor  or  maker.  Chit.  Bills  (8th  Ed.)  593,  594.  Whitwell  v. 
Bennett,  3  Bos.  &  P.  559;  Waynam  v.  Bend,  1  Camp.  175;  Eales  v.  Diclier, 
Moody  &  M.  324;  Pierce  v.  Crafts,  12  Johna  (N.  Y.)  90.  In  the  United  States 
the  doctrine  has  been  extended  to  suits  between  other  than  immediate  parties, 
and  it  has  frequently  been  held  that  under  the  counts  for  money  lent,  money 
paid,  and  money  had  and  received  the  holder  might  recover  against  the  ao- 
ceptor  or  a  remote  indorser.  Ellsworth  v.  Brewer,  11  Pick.  (Mass.)  316;  Pierce 
V.  Crafts,  supra;  Penn  v.  Flack,  3  Gill  &  J.  (Md.)  369;  Tenney  v.  Sanborn,  5  N. 
H.  557;  Howes  v.  Austin.  35  111.  396;  Edw.  Bills  &  N.  (3d  Ed.)  §  933;  2  Ames, 
Cas.  Bills  &  N.  539,  note  1,  874.  It  seems  that  the  form  of  action  did  not  affect 
the  rights  of  the  parties,  nor  lessen  the  proof  required  to  establish  the  plain- 
tiff's right  to  recovery.  Cruger  v.  Armstrong,  3  Johns.  Cas.  (N.  Y.)  5;  HARKER 
V.  ANDERSON,  21  Wend.  (N.  Y.)  372;   Edw.  Bills  &  N.  (3d  Ed.)  S  934. 

88  Sawyer  v.  Warner,  15  Barb.  282. 

88  Breck  v.  Cole,  4  Sandf.  (N.  Y.)  80;  GERMANIA  BANK  v.  DISTLER.  4 
Hun  (N.  Y.)  033;   1  Pars.  Bills  &  N.  41. 

«o  Joseph  V.  Bigelow,  4  Cush.  82-84. 

«i  Walker  v.  Clay,  21  Ala.  797;   Blakemore  v.  Wood,  3  Sneed  (Tenn.)  470. 

«2  NORWICH  BANK  V.  HYDE,  13  Conn.  282.  Pars.  Bills  &  N.  333-338; 
Abb.  Tr.  Ev.  411. 

«8  James  v.  Chalmers,  6  N.  Y.  209;  Kidder  v.  Horribin,  72  N.  Y.  ir)9.  In 
PEACOCK  V.  RHODES,  2  Doug.  633,  it  was  held  that,  where  a  bill  of  exchange 


330  PURCHASER    FOR    VALUE    WITHOUT    NOTICE.  (Ch.   S 

(5)  That  the  instrument  is  unpaid."* 

(6)  That  in  case  of  an  undated  indorsement  the  transfer  and  in- 
dorsement were  made  before  the  maturity  of  the  instrument  and 
without  notice.""  Thus  the  instrument  itself  is  proof  of  most  of 
the  preliminary  facts  necessary  to  establish  a  right  of  action,  and 
it  remains  to  authenticate  it  as  a  valid  instrument. 

Having  once  produced  the  paper  with  these  presumptions  attach- 
ed to  it,  it  becomes  necessary  for  this  purpose  to  prove  the  following 
facts : 

(1)  If  the  action  is  by  the  payee  against  the  maker  or  acceptor^ 
prove  the  maker's  or  acceptor's  signature.""  It  is  unnecessary  to 
prove  a  demand  of  the  maker  or  acceptor  because  the  suit  is  itself 
a  sufficient  demand."' 

(2)  In  an  action  brought  by  an  indorsee  against  the  acceptor  or 
maker,  the  holder  must  prove  the  signature  of  the  defendant  and 
also  of  the  payee.""     The  proof  of  the  latter  signature  is  not  for  the 

Tvlth  a  blank  Indorsement  had  been  stolen  and  negotiated,  the  Innocent  In- 
dorsee might  recover  on  It.  In  PRICE  v.  NEAL,  3  Burrows,  1355,  it  was  held 
that  an  innocent  indorsee  could  not  be  compelled  to  refund  the  money  paid  to 
him  on  a  forged  acceptance.  If  a  bill  of  exchange  be  drawn  in  favor  of  a 
fictitious  payee,  and  that  circumstance  be  known  as  well  to  the  acceptor  as  the 
drawer,  and  the  name  of  such  payee  be  indorsed  on  the  bill,  an  innocent  in- 
dorsee for  a  valuable  consideration  may  recover  on  it  against  the  acceptor, 
as  on  a  bill  payable  to  bearer.  INHNET  v.  GIBSON,  3  Term  R.  481.  If  A  de- 
posit bills,  indorsed  in  blank,  with  B,  his  banker,  to  be  received  when  due,  and 
the  latter  raise  money  upon  them  by  pledging  them  with  C,  another  banker, 
and  afterwards  become  bankrupt,  A  cannot  maintain  trover  against  C  for  the 
bills.  COLLINS  v.  MARTIN,  1  Bos.  &  P.  G48.  And  see  MECHANICS'  BANK 
V.  STRAITON,  *42  N.  Y.  3G5. 

8*  McKyring  v.  Bull,  16  N.  Y.  297;  Daniel.  Neg.  Inst.  §  1200. 

«B  Hendricks  v.  Judah,  1  Johns.  318;  Andrews  v.  Chadboume,  19  Barb.  147; 
Lewis  V.  Lady  Parker,  4  Adol.  &  E.  &38;  Parkin  v.  Moon,  7  Car.  &  P.  408; 
New  Orleans  Canal  &  Banking  Co.  v.  Montgomery,  95  U.  S.  16;  Leland  v.  Fam- 
ham,  25  Vt.  553;  Mason  v.  Noonan,  7  Wis.  600;  Mobley  v.  Ryan.  14  111.  51; 
Webster  v.  Calden,  56  Me.  204. 

8«  Edw.  Bills  &  N.  §  465;  Abb.  Tr.  Ev.  p.  391.  In  many  states  proof  of  the 
defendant's  signature  Is  dispensed  with  unless  put  in  Issue  by  denial  supported 
by  affidavit.    Daniel,  Neg.  Inst.  §  1219. 

*">  Green  v.  Goings,  7  Barb.  6.52. 

«8  Where  a  bill  is  drawn  in  the  name  of  a  fictitious  person,  payable  to  the 
order  of  the  drawer,  the  acceptor  is  considered  as  undertaking  to  pay  to  the 


§§  128-131)  PRESUMPTION    AND    BURDEN    OF    PROOF.  331 

purpose  of  fixing  the  liability  of  the  payee,  but  of  proving  that  the 
title  is  in  the  holder."' 

(3)  In  an  action  against  an  indorser  of  a  bill  or  note,  the  plaintiff 
need  not  prove  the  signature  of  the  maker, ^°  drawer,'^  or  prior  in- 
dorsers,  because,  on  proof  of  the  defendant's  signature,  the  indorser 
is  deemed  to  warrant  that  of  the  prior  indorsersJ^  In  such  case  it 
is  necessary  to  prove  only  the  signatures  of  the  persons  sought  to 
be  recovered  against  and  of  persons  whose  indorsement  is  necessary 
to  establish  the  plaintiff's  title. 

(4)  In  case  of  a  note  or  bill  payable  in  blank  or  to  bearer,  no  proof 
of  title  by  proving  signatures  of  indorsers  is  necessary;^'  but, 
where  it  is  sought  to  recover  against  a  party  from  whom  title  is  de- 
rived through  special  indorsements,  the  signatures  of  special  in- 
dorsers must  be  proved.^* 

order  of  the  person  who  signed  as  drawer;  and  therefore  an  indorsee  may 
bring  evidence  to  show  that  the  signatvu-es  of  the  drawer,  to  the  bill  and  to 
the  first  indorsement,  are  in  the  same  handwriting.  COOPER  v.  MEYER,  lO' 
Barn.  &  C.  4G8.  In  ROBINSON  v.  YARROW,  7  Taunt.  455,  It  was  held  that 
the  acceptance  of  a  bill  drawn  by  procuration  admits  the  drawer's  handwrit- 
ing, and  the  procuration  to  draw.  In  an  action  by  the  indorsee  against  the  ac- 
ceptor of  a  bill  of  exchange,  the  witness  called  to  prove  the  handwriting  of 
the  drawer  stated  that  neither  the  drawing  nor  indorsement  were  of  the 
handwriting  of  the  person  whose  they  pm^ported  to  be.  But  it  was  proved 
that  the  defendant  had  acknowledged  the  acceptance  to  be  his,  and  it  was 
contended  that,  as  the  acceptance  admitted  the  drawing  to  be  connect,  the 
jury  might  find  for  the  plaintiff,  if  they  thought,  upon  inspection  of  the  bill, 
that  the  drawing  and  indorsement  were  of  the  same  handwriting.  It  was 
held  necessary,  however,  that  some  proof  should  be  given  as  to  whose  the 
handwriting  was.  ALLPORT  v.  MEEK,  4  Car.  &  P.  267.  A  bill  purporting  t» 
be  drawn  by  B.  &  W.  (a  real  firm),  payable  to  their  order,  and  indorsed  by 
them,  was  negotiated  by  the  acceptor  with  that  indorsement  upon  it.  Both 
drawing  and  indorsement  were  forgeries.  It  was  held  that  if  the  bill  was 
accepted,  and  negotiated  by  the  acceptor  with  knowledge  of  the  forgeiy,  he 
was  estopped  to  deny  tlie  indorsement,  as  well  aa  the  drawing,  by  B.  &  W. 
BEEMAN  V.  DUCK,  11  Mees.  &  W.  251. 

99  COGGILL  V.  BANK,  1  N.  Y.  115;   CANAL  BANK  v.  BANK  OF  AUJANY, 
1  Hill  (N.  Y.)  287. 

10  Dalrymple  v.  Hillenbrand,  62  N.  Y.  5. 

71  Rose.  N.  P.  Ev.  381-309. 

7  2  f;o(l(lard  v.  Merchants'  Bank,  4  N,  Y.  147;  TURNBULL  v.  BOWYER,  40 
N.  Y.  4.j6. 

78  James  v.  Chalmers,  6  N.  Y.  200.     Ree,  also,  supra,  p.  110. 
7«  SMITH  V.  CHE.STER,  1  Term  R.  »N>i,    Sec  .supra,  p.  116. 


332  PURCHASER    FOR    VALUE    WITHOUT    NOTICE.  (Ch.   8 

(5)  Where  the  recovery  is  sought  against  a  drawer"  or  an  in- 
dorser  or  indorsers,"  the  plaintiff,  in  addition  to  this  fact,  must 
prove  that  the  paper  was  duly  presented  and  dishonored,  and  that 
due  notice  thereof  was  given  to  the  defendant.'^ 

The  plaintiff  having  established  all  that  is  necessary  to  entitle 
hira  to  judgment  it  becomes  incumbent  upon  the  defendant  to  prove 
his  defense,  which  he  does  by  proving  in  extenso  whatever  facts 
may  constitute  it.  And  here  the  presumptions  vary  accordingly  as 
the  action  is  between  immediate  parties  or  between  a  remote  party 
and  a  bona  fide  holder.  In  case  of  an  action  litigated  between  im- 
mediate parties,  the  general  rule  is  that  the  evidence  produced  upon 
the  various  issues  is  governed  by  the  rules  governing  the  produc- 
tion and  establishment  of  those  issues  in  case  of  ordinary  contracts. 
But  where  the  litigation  is  between  a  purchaser  for  value  and  a 
prior  party,  the  further  evidence  depends  upon  whether  the  facts 
proved  by  the  defendant  are  those  constituting  a  real  defense  or  a 
personal  defense.  If  the  defense  is  a  real  defense,  the  character  of 
a.  purchaser  for  value  without  notice  cannot  avail  the  holder,  and 
the  question  to  be  established  is  solely  whether  the  real  defense 
does  or  does  not  exist  and  is  established  according  to  the  process 
in  ordinary  cases  of  contract  But  where  the  defense  is  a  personal 
one  the  cases  divide  themselves  into  two  classes,  and  these  are:  (1) 
Cases  where  the  defense  proved  shows  lack  or  failure  of  considera- 
tion or  premature  payment  or  release  of  the  bill  or  note;  (2)  cases 
where  the  defense  proved  shows  fraud,  duress,^®  or  the  illegality  of 
consideration  in  the  inception  of  the  instrument.  In  the  first  class 
of  cases  the  general  presumption  prevails  that  the  indorsee  of  a 
negotiable  bill  or  note  is  a  bona  fide  holder  for  value.^^  This  pre- 
sumption is  not  repelled  merely  by  proof  that  the  bill  or  note,  as  be- 

7  8  Shultz  V.  Depuy,  3  Abb.  Prac.  252. 

76  Clift  V.  Rodger,  25  Ilun,  39. 

77  Conkling  v.  Gandall,  1  Abb.  Dec.  423.     Post,  p.   336. 

7  9  In  an  action  by  the  indorsee  against  the  drawer  of  a  bill  of  exchange,  If 
it  appears  that  the  defendant  drew  the  bill  without  consideration,  and  under 
duress,  it  is  incumbent  on  the  plaintiff  to  prove  that  he  gave  value  for  it,  al- 
though it  was  indorsed  to  him  before  it  came  due.  DUNCAN  v.  SCOTT,  1 
Camp.  100. 

SI  Koss  v.  Bedell,  5  Duer  (N.  Y.)  4G2;  Case  v.  Mechanics'  Baulking  Ass'n,  4 
N.  Y.  1G6. 


§§  128-131)  PRESUMPTION    AND    BURDEN    OF    PROOF.  333 

tween  the  immediate  parties,  was  without  consideration,"  or  that 
the  consideration  failed,®^  or  was  made,  indorsed,  or  accepted  by  one 
for  the  sole  accommodation  of  the  other.**  When  no  other  proof  is 
given,  the  holder  is  not  bound  to  prove  a  valuable  consideration. 
Thus,  unless  the  defendant  proves  that  the  plaintiff  had  notice  of  the 
fact  of  such  want  or  failure  of  consideration  or  of  the  payment  or 
discharge  of  the  bill  or  note,  or  proves  that  for  some  reason  the 
plaintiff  is  not  a  bona  fide  holder  for  value,®"^  then  these  facts  are  ir- 
relevant, and  the  defense  will  not  be  received.  But  if  the  defend- 
ant first  proves  by  evidence  sufficient  to  go  to  the  jury  that  the  trans- 
fer to  the  plaintiff  was  in  bad  faith,*^  or  without  value,®''  he  may 
then  prove  the  facts  of  his  defense.  On  such  proof  by  the  defend- 
ant it  becomes  incumbent  on  the  plaintiff  to  prove  that  he  is  a  hold- 
er in  good  faith  and  for  value.  And  if  he  cannot  prove  this,  he  must 
disprove  the  facts  of  the  defendant's  defense,  or  else  he  cannot  re- 
cover. 

Cases  where  the  defense  is  fraud  or  illegality  of  consideration  are 
distinguished  from  the  defenses  first  mentioned  in  that  their  proof 
by  the  defendant  changes  the  presumption  that  the  holder  is  one  in 
good  faith  and  for  value,  and  throws  the  burden  of  proving  these 
facts  in  the  first  instance  upon  the  plaintiff.  It  being  shown  that 
the  bill  or  note,  or  the  transfer  thereof,  is  tainted  with  fraud  or  il- 
legality, the  assumption  is  that  the  holder  is  a  partaker  in  the  fraud 
or  illegality,  and  he  must  prove  that  he  is  not.  In  the  often-quoted 
case  of  DUNCAN  v.  SCOTT,««  where  a  bill  was  given  by  the  defend- 
ant under  coercion  and  fear  of  death.  Lord  Ellenborough  said:    "It 

82  "The  maker  of  a  negotiable  instrument  is  not  allowed  to  impair  its  value 
In  the  hands  of  a  bona  fide  holder  by  denying  the  existence  of  a  consideration, 
or  by  otherwise  showing  that  it  is  not  what  it  purports  to  be."  Lewis,  J.,  In 
LENNIG  v.  RALSTON,  23  Pa.  St.  137. 

88  Mechanics'  &  Traders'  Nat.  Bank  v.  Crow,  60  N.  Y.  85. 

8*  Harger  v.  Worrall,  09  N.  Y.  370. 

86  Brookman  v.  Millbank.  50  N.  Y.  378;  Abb.  Tr.  Er.  441;  WRIGHT  v. 
IRWIN,  33  Mich.  32;  Gray  v.  Bank  of  Kentucky,  29  Pa.  St.  365;  Wilson  v. 
Lazier,  11  Grat  47S;  Whittaker  v.  Edmunds.  1  Moody  &  R.  306;  COLLINS  v. 
GILBERT,  94  U.  S.  753;    Holden  v.  Rattan  Co.,  108  Mass.  570,  47  N.  B.  241. 

86  Smith  V.  Sac  Co.,  11  Wall.  139-147. 

87  First  Nat  Bank  v.  Green,  43  N.  Y.  298;  CoUina  v.  Gilbert,  94  U.  S.  763. 

88  (1807)  1  Camp.  100. 


334  PURCHASER    FOR    VALUE    WITHOUT    NOTICE.  (Cll.  8 

is  incumbent  upon  the  plaintiff  to  give  some  evidence  of  consider- 
ation;" and  this  principle  has  bee^n  followed  in  many  cases  in  Eng- 
land, and  in  most  of  the  states  of  the  United  States.®®  It  has  been 
explained  to  mean  that  a  plaintiff  suing  upon  a  negotiable  note  or 
bill  purchased  before  maturity  is  presumed,  in  the  first  instance,  to 
be  a  bona  fide  holder.  But  when  the  acceptor  or  maker  has  shown 
the  bill  or  note  was  obtained  from  him  under  duress,  or  that  he  was 
defrauded  of  it,  the  plaintiff  will  then  be  required  to  show  under 
what  circumstances  and  for  what  value  he  became  a  holder.  The 
reason  for  this  nile  is  that,  where  there  is  fraud,  it  is  but  reasonable 
to  suppose  that  he  who  is  guilty  of  it  will  part  with  the  instrument 
for  the  pnr])ose  of  enabling  some  third  party  to  recover  upon  it. 
Such  presumption  operates  against  the  holder,  and  devolves  upon 
him  the  duty  of  showing  value  and  lack  of  notice  in  rebuttal  of  the 
duress  or  fraud  in  order  to  maintain  his  action. *"  In  the  cases  of 
illegality  the  rule  is  the  same,  and  for  the  same  reason.  The  bur- 
den is  cast  upon  the  plaintiff  to  show  that  he  took  the  paper  for 
value  and  in  good  faith.  Some  of  the  cases  declare  that  the  holder 
need  not  show  he  had  lack  of  notice,  but  need  only  show  value,®^ 
because  the  burden  of  showing  notice  is  upon  the  party  who  seeks 
to  impeach  the  title.  But  the  other  courts  maintain,  and  properly, 
that,  in  addition  to  proving  value,  the  holder  should  prove  that  he 
bought  the  note  in  good  faith,  and  should  show  that  he  had  no 
knowledge  or  notice  of  the  fraud.'^  If  value  and  notice  are  dis- 
ss CX,ARK  r.  PEASE,  41  N.  H.  414;  PATON  v.  COIT,  5  Mich.  505;  Carrier 
V.  Cameron,  31  Mich.  373;  KELLOGG  v.  CURTIS,  69  Me.  212;  SMITH  v. 
LIVINGSTON,  111  Mass.  342;  NATIONAL  BANK!  v.  KIRBY,  108  Mass.  457; 
Rocl£  Island  Nat  Banlv  v.  Nelson,  41  Iowa,  503;  REAMER  v.  BELL,  79  Pa.  St. 
292;  BAILEY  v.  BIDWEI^L,  13  Mees.  &  W.  73;  HARVEY  v.  TOWERS,  6 
Exch.  656;    SMITH  v.  BRAINE,  16  Q.  B.  244. 

00  First  Nat.  Banlc  v.  Green.  43  N.  Y.  298;  Wilson  v.  Roclie,  58  N.  Y.  642; 
Harger  v.  Worrall,  m  N.  Y.  370. 

01  JONES  V.  GORDON,  2  App.  Cas.  16;  KELLOGG  y.  CURTIS,  69  Me.  212; 
NATIONAL  BANK  v.  KIRBY,  108  Mass.  497.  See  Benj.  Chalm.  Bills  &  N. 
art.  97,  and  note. 

02  Canajoharie  Nat.  Bank  v.  Diefendorf,  123  N.  Y.  191,  25  N.  E.  402;  Vos- 
burgh  V.  Diefendorf,  119  N.  Y.  3r)7,  23  N.  E.  801.  See,  also,  Northampton  Nat, 
Bank  v.  Kidder,  106  N.  Y.  221.  12  N.  E.  577;  Farmers'  &  Citizens'  Bank  v. 
Noxon,  45  N.  Y.  762;  Cummings  v.  Thompson.  18  Minn.  246  (Gil.  228);  Sulli- 
van V.  Langley,  12C  Mass.  437;  SMITH  v.  LIVINGSTON.  Ill  Mass.  342.    Such 


^§  128-131)  PRESUMPTION    AND    BURDEN    OF    PROOF.  335 

puted  as  facts,  they  must  be  passed  upon  by  the  jury.  Hence  it  fol- 
lows that  it  is  not  necessary  for  the  defendant,  as  in  case  of  lack  or 
failure  of  consideration,  to  show  that  the  plaintiff  did  not  pay  value, 
or  that  he  had  notice  of  the  facts  of  the  defense,  but  these  facts 
must  appear  afSrmatively  on  the  plaintiff's  part.  It  is  probable  that 
this  rule  does  not  mean  that  the  plaintiff  must  prove  a  direct  neg- 
ative,'' but  that,  as  a  part  of  the  direct  case,  he  must  show  the  facts 
of  the  transaction  constituting  the  transfer,  and  then,  if  there  is 
nothing  in  the  transaction  itself  to  show  bad  faith,  and  there  is  no 
proof  from  other  sources  of  want  of  good  faith,  or  actual  or  construc- 
tive notice  of  the  defense,  the  plaintiff  must  prevail. 

Is  the  rule  under  Neg.  Inst  L.  §  98;    and  also  under  the  English  Bills  of  Ex- 
change Act  (section  29)  as  construed  In  TATAM  v.  HASLAR,  23  Q.  B.  Div.  845. 
«>8  Sullivan  v.  Langley,  120  Mass.  437;    NATIONAL.  BANK  y.  KIRBY,  108 
Mass.  497. 


3iJ6  PBJiSEWTMENT   AND    NOTICE   OF    DISHONOE.  (Ch.  9 

CHAPTER  IX. 

PRESENTMENT  AND  NOTICE  OP  DISHONOR. 

132.     In  General 
133-140.     Presentment 
141-144.  By  Whom  and  to  Whom  Made— Effect  of  Failure  to  Present 

and  Protest 
145-146.     Notice  of  Dishonor. 
147-147b.    Excuses  for  Failure  to  Present  or  Give  Notice. 

IN  GENERAL. 

132.  To  charge  the  drawer  and  indorsers,  presentment 
for  acceptance  or  for  payment,  as  the  case  may  be,  to  be 
followed  in  case  of  refusal  by  notice  of  dishonor,  is  neces- 
sary. 

The  doctrines  of  presentment,  protest,  and  notice  of  dishonor  re- 
late peculiarly  to  the  liabilities  of  the  drawer  and  indorser.  These 
acts,  on  the  part  of  the  holder,  are  a  condition  or  stipulation  which 
the  law  merchant  embodies  in  the  contracts  of  each  of  them.  They 
are  so  much  of  the  essence  of  the  contract  that,  unless  the  holder 
fulfills  them  in  exact  accordance  with  the  requirements  of  law,  he 
cannot  in  most  circumstances  enforce  the  instrument  We  have 
already  pointed  out  ^  that  the  law  construes  the  contract  of  the 
drawer  and  also  of  the  indorser  to  be  distinct  promises  to  every 
party  who  subsequently  takes  the  instrument,  to  pay  the  instrument 
if  the  acceptor  or  maker  does  not.  And  we  have  also  pointed  out ' 
that  the  law  implies  as  a  condition  of  the  enforcement  of  this  con- 
tract of  indemnity  that  the  holder  shall  first  seek  the  payment  of 
the  instrument  from  the  persons  primarily  liable  to  pay  it  If  the  in- 
strument is  not  paid  by  them,  then  there  is  prescribed  a  system  of 
formalities  to  be  strictly  followed  to  enable  the  holder  to  claim  at 
the  law's  hands  the  enforcement  of  the  drawer's  or  indorser's  lia- 
bility.    These  formalities  are  usually,  though  perhaps  inaccurately, 

»  See  supra,  pp.  I5r>-1.'9. 
a  See  supra,  pp.  156-159. 


§§  lo3-J39)  PRESENTMENT.  337 

known  as  "presentment,"  "demand,"  "protest,"  and  "notice  of  dis- 
honor," some  or  all  of  them  to  be  followed  according  as  the  case  may 
be.  And  it  is  our  purpose  to  take  up  each  of  these  steps  in  their 
order,  to  show  their  nature  and  the  rules  relating  to  them.  We 
shall  first  examine  the  subject  of  presentment,  stating  the  rules  as 
to  its  nature  and  the  time  within  which,  the  place  where,  and  per- 
sons by  whom  and  to  whom  it  should  be  made. 

PRESENTMENT. 

133.  The  presentment  of  a  bill  or  note  is  commonly  as 
foilo-ws: 

(a)  Of  a  bill  for  acceptance. 

(b)  Of  a  bill  or  note  for  payment. 

134.  A  bill  or  note  is  presented  by  exhibiting  It  and  re- 
questing its  acceptance  or  payment.  When  presented, 
the  instrument  must  be  in  the  possession  of  the  person 
presenting  the  same. 

134a.  Presentment  for  acceptance  is  necessary  in  the 
case  of  bills  payable  at  or  after  sight,  or  after  demand. 
In  other  cases,  in  the  absence  of  express  stipulation,  it  is 
optional. 

135.  Presentment  for  acceptance  may  be  made  at  any 
time  before  maturity,  except  in  cases  of  bills  payable  a* 
or  after  sight,  or  after  demand. 

136.  Bills  payable  at  or  after  sight,  or  on  or  after  de- 
mand, or  after  any  other  uncertain  event,  must  be  pre- 
sented within  a  reasonable  time, 

137.  Presentment  for  payment  must  be  made  on  the 
day  -when  the  bill  or  note  is  due.  A  bill  or  note  properly 
presented  for  payment  must  be  paid  forthwith. 

138.  Presentment  should  be  made  during  usual  and 
reasonable  hours. 

139.  The  presentment  for  acceptance,  if  the  bill  is  ad- 
dressed to   the   drawee   at   a   particular   place,  should  be 

NEG. BILLS.— 22 


338  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  (Cll.   9 

made  at  that  place.  If  the  bill  is  not  addressed  to  any 
particular  place,  presentment  should  be  made  either  to  the 
drawee  personally,  or  at  his  dwelling  or  place  of  business 
at  the  time  of  presentment. 

140.  It  is  not  necessary  that  a  presentment  for  pay- 
ment should  be  personal.  It  is  sufB.cient  if  made  at  the 
place  specified  in  the  instrument,  or  personally  if  the 
maker  or  acceptor  waives  his  right  of  having  it  made  at 
the  place  stipulated  in  the  contract;  and,  if  no  place  is 
specified  in  the  instrument,  then  if  made  at  the  place  of 
business  or  residence  of  the  maker  or  acceptor. 

A  proper  legal  presentment  consists  of  an  actual  exhibition  of  the 
paper  *  to  the  drawee,  acceptor,  or  maker.  In  case  of  a  presentment 
for  payment,  the  reasons  for  a  personal  presentment  and  an  exhibi- 
tion of  the  bill  *  are  that  the  acceptor  or  maker  may  judge  of  the 
genuineness  of  the  bill;  that  he  may  judge  of  the  right  of  the  holder 
to  receive  the  contents;  and  that  he  may  obtain  immediate  posses- 
sion of  the  bill  or  note,  upon  paying  its  amount.'     In  case  of  pre- 

8  Daniel,  Neg.  Inst.  §§  462,  463;  Edw.  Bills  &  N.  8  558.  See  Neg.  Inst.  Jj.  § 
134. 

*  MUSSON  V.  LAKE,  4  How.  262. 

6  In  the  case  of  HANSARD  v.  ROBINSON,  7  Barn.  &  C.  9,  which  was  an 
action  by  an  indorsee  against  the  acceptor  of  a  bill  of  exchange,  it  was  shown 
that  the  bill  was  not  presented  for  some  time  after  it  was  due  and  that  the  de- 
fendant offered  another  bill,  but  before  such  bill  was  given,  the  first  bill  was 
lost  by  the  plaintiff's  clerli.  It  was  said  by  Lord  Tenterden,  C.  J.,  in  his 
opinion,  that  It  was  the  custom  of  merchants  that:  "The  holder  of  the  bill 
shall  present  the  instrument,  at  its  maturity,  to  the  acceptor,  demand  payment 
of  the  amount,  and  iipon  receipt  of  the  money  deliver  up  the  bill.  The  ac- 
ceptor paying  the  bill  has  a  right  to  the  possession  of  the  instrument  for  his 
own  security,  and  as  his  voucher  and  discharge  pro  tanto  in  his  account  with 
the  drawer."  As  to  the  acceptor's  remedy  should  the  holder  refuse  to  deliver 
the  bill  after  receipt  of  payment,  see  Alexander  v.  Strong,  9  Mees.  &  W.  733; 
Stone  V.  Clough,  41  N.  H.  290;  Otisfield  v.  Mayberry,  63  Me.  197.  It  has  con- 
sistently been  held  in  England  and  many  states  that  no  action  at  law  lies 
against  the  acceptor  or  malier  upon  a  bill  or  note  which  has  been  lost  or  de- 
stroyed, the  plaintiff  being  left  to  his  remedy  in  equity,  which  has  power  to 
secure  the  defendant  against  being  called  upon  a  second  time  to  pay  by  re- 
quiring the  plainUff  to  furnish  indemnity.     PIERSON  v.  HUTCHINSON,  2 


■§§  133-140)  PRESENTMENT.  339 

fientment  for  acceptance,  the  reasons  for  a  personal  presentment  are 
that  the  acceptor  has  a  right  to  see  that  the  person  demanding  it 
has  a  right  to  do  so  before  he  is  bound  to  answer  whether  he  will 
accept  or  not,*  and  that  in  those  jurisdictions  where  it  is  required 
that  the  acceptance  should  be  written  on  the  paper,  a  demand  for 
acceptance  would  clearly  be  futile  unless  the  paper  were  at  hand  to 
write  the  acceptance  upon  it  But  as  these  reasons  show,  this  rule 
is  for  the  protection  of  the  drawee,  acceptor,  or  maker,  and  he  may 
therefore  waive  them  by  not  insisting  upon  a  personal  presentment. 
If  the  holder  is  in  a  situation  to  comply  with  their  demand  for  per- 
sonal presentment  it  is  sufficient.  Hence,  if  the  holder  has  the  bill 
or  note  with  him  at  the  time  of  presentment,  and  so  describes  it  as 
to  leave  no  doubt  but  that  the  drawee,  acceptor,  or  maker  under- 
stands what  the  instrument  in  question  is,  and  the  drawee,  acceptor, 
■or  maker  does  not  require  him  to  produce  it,  then  a  refusal  or  omis- 
sion to  accept  or  pay  will  subject  all  parties  to  the  consequent  pen- 
alties."    The  sole  requirement  is  that  the  instrument  must  be  in  the 

€amp.  211;  HANSARD  v.  ROBINSON.  7  Barn.  &  C.  90;  RAMUZ  v.  CROWE, 
1  Exch.  1G7;  Rowley  v.  Ball,  3  Cow.  (N.  Y.)  303;  Moses  v.  Trice,  21  Grat.  (Va.) 
556.  In  some  states,  however,  a  recovery  at  law  upon  furnishing  indemnity 
has  been  allowed.  Fales  v.  Russell,  16  Picli.  (Mass.)  315;  HINCKLEY  v.  RAID- 
ROAD  CO.,  129  Mass.  52;  Bridgeford  v.  Manufacturing  Co.,  34  Conn.  546; 
Morgan  v.  Reinzel,  7  Cranch,  273.  And  very  generally  it  is  held  that  a  recovery 
may  be  had  If  It  can  be  shown  that  the  instrument  has  been  actually  de- 
stroyed. Des  Arts  v.  Leggett,  16  N.  Y.  582;  Blandin  v.  Wade,  20  Kan.  251. 
In  some  states  recovery  without  indemnity  has  been  allowed  where  the  In- 
stniment  was  destroyed,  or  overdue,  or  transferable  only  by  Indorsement,  and 
shown  to  be  unindorsed.  In  some  states  the  matter  is  regulated  by  statute. 
Rand.  Com.  Paper,  §  1G99.  As  to  whether  the  owner  of  a  lost  note  may  re- 
cover against  the  indorser,  upon  giving  indemnity,  it  was  hold  by  Hoar,  J., 
in  TUTTLE  v.  STANDISH,  4  Allen  (Mass.)  481,  that  "all  the  considerations 
against  allowing  such  a  recovery  apply  more  forcibly  to  the  case  where  paj'- 
ment  Is  demanded  of  an  Indorser,  for  he  is  entitled  to  possession  of  the  note 
In  order  to  have  recourse  against  the  maker.  See,  generally.  Rand.  Com. 
Paper.  §§  1691-1703;   Daniel,  Neg.  Inst.  §§  1475-1485. 

•  Fall  River  Nat.  Banli  v.  Walton,  5  Mete.  (Mass.)  216. 

BEtheridge  v.  Ladd,  44  Barb.  60;  OCEAN  BANK  v.  FANT,  50  N.  Y.  475; 
Crandall  v.  Schroeppel,  1  Hun,  557;  Freeman  v.  Boynton,  7  Mass.  483;  Draper 
v.  Clemens,  4  Mo.  52;  Nailor  v.  Bowie.  3  Md.  251;  King  v.  Crowell.  61  Me.  244; 
FlBher  v.  BeckwIth,  19  Vt.  31;  FuUerton  v.  Bank  of  U.  S.,  1  i'et.  601. 


340  PRESENTMKNT    AND    NOTICE    OF    DISHONOR.  (Ch.   9 

possession  of  the  person  presenting  it  whether  exhibited  or  not.' 
The  demand  for  acceptance  or  payment  in  ordinary  cases  should  be 
verbal,  but  in  some  eases  this  may  be  impracticable  or  not  in  rea- 
son to  be  required.  In  such  cases  it  may  be  in  writing.  But,  how- 
ever made,  it  should  be  absolute,  requiring  present  actual  accept- 
ance or  payment.' 

The  dishonor  of  a  bill  of  exchange  is  the  non-compliance  on  the 
part  of  the  drawee  or  acceptor  with  the  conditions  which  the  law 
has  construed  to  be  embodied  in  the  order  contained  in  it  The 
order  contained  in  a  bill  of  exchange  on  the  part  of  the  drawer 
and  indorser  is  (1)  an  order  on  the  drawee  to  accept  the  bill  on  pre- 
sentment; (2)  an  order  on  the  drawee  or  acceptor  to  pay  the  bill  at 
maturity.  The  refusal  of  the  drawee  or  acceptor  to  do  either  of 
these  things  dishonors  the  bill."  The  contract  which  the  drawer 
and  indorser  thus  make  with  the  holder  is  that  the  drawee  will, 
in  the  first  place,  accept  the  bill.  It  dilTers  in  cases  of  bills  payable 
after  sight  or  after  demand  and  bills  payable  after  a  given  date, 
because  in  the  former  cases  from  the  terms  of  the  contract  the  time 
for  which  the  drawer  or  indorser  indemnifies  the  holder  is  uncertain 
and  indefinite.  To  prevent  this  from  becoming  a  hardship  to  these 
parties,  the  law  declares  that  in  cases  of  bills  made  payable  after 
sight,  or  after  demand,  or  upon  any  other  event  not  absolutely  cer- 
tain, the  contract  of  the  drawer  and  indorser  is  that  the  drawee,  on 
the  bill  being  presented  to  him  in  a  reasonable  time  from  the  date, 
shall  accept  it,  and,  having  so  accepted,  shall  pay  it  when  duly  pre- 

T  In  ARNOLD  v.  DRESSER,  8  Allen  (Mass.)  435,  which  was  an  action 
against  the  indorser  of  a  joint  promissory  note,  the  facts  were  that  upon  the 
day  of  maturity  payment  was  demanded  of  tlie  promisors,  but  the  demandant 
did  not  have  the  note  in  his  possession,  and  he  did  not  receive  payment.  It 
was  held  by  Bigelow,  C.  J.,  that  "no  valid  presentment  and  demand  can  be 
made  by  any  person  without  having  the  note  in  his  possession  at  the  time,  so 
that  the  maker  may  receive  It  in  case  he  pays  the  amount  due,  unless  special 
circumstances,  such  as  the  loss  of  the  note,  or  its  destruction,  are  shown  to 
excuse  its  absence." 

«  Storj',  Prom.  Notes,  §  212.  "A  demand  of  payment,  at  the  place  Indicated 
In  the  note,  on  or  after  its  maturity,  is  a  prerequisite  to  the  right  of  recov- 
ery."   Mai  tin,  J.,  In  WOOD  v.  MULLEN,  3  Rob.  (La.)  395.  396. 

»  Ames,  Bills  &  N.  p.  787;   Edw.  Neg.  Inst.  §§  529-635. 


§§  133-140)  PRESENTMENT.  341 

sented  for  payment.*"  Presentment  for  acceptance  in  such  cases  ia 
hence  essential.  But  in  case  of  a  bill  payable  a  certain  time  after 
date,  the  contract  of  the  drawer  and  indorser  is  that  the  drawee 
shall  accept  it  if  it  is  presented  to  him  before  the  time  of  payment; 
and,  having  so  accepted,  shall  pay  it  when  it  is  in  due  course  pre- 
sented for  payment.  The  contract  of  the  drawer  and  indorser  is  dis- 
tinguished from^  their  contract  on  bills  payable  after  demand,  or 
after  sight,  in  that  the  drawer,  by  fixing  a  day  certain  for  payment, 
assumes  the  responsibility  of  providing  funds  at  that  time,  and  the 
indorser  makes  a  new  bill  on  the  same  terms,  and  waives  his  right  of 
immediate  acceptance  by  putting  his  bill  into  circulation  without  ac- 
ceptance. Presentment  for  acceptance  in  this  case  is  therefore  op- 
tional,*^ for,  if  the  bill  is  not  presented  for  acceptance  at  all,  never- 

10  ALLEN  V.  SUYDAM,  20  Wend.  321;  AYMAR  v.  BEERS.  7  Cow.  705; 
ROBINSON  V.  AMES,  20  Johns.  (N.  Y.)  146;  Elting  v.  Brincherhoff,  2  Hall  (N. 
Y.)  459;  MUILMAN  v.  D'EGUINO,  2  H.  Bl.  569;  WALLACE  v.  AGRY.  4 
Mason,  336,  Fed.  Gas.  No.  17,090;  Id.,  5  Mason,  118,  Fed.  Gas.  No.  17,097; 
MITCHELL  V.  DE  GRAND,  1  Mason,  176,  Fed.  Gas.  No.  9,661;  Nichols  v.  Black- 
more,  27  Tex.  586;  Mullick  v.  Radakissen.  9  Moore,  P.  G.  46.  See  Neg.  Inst.  L. 
§  240.  Gf.  section  26.  Under  the  act  it  seems  that  bills  payable  "at  sight" 
need  not  be  presented  for  acceptance. 

11  THILPOTT  V.  BRYANT,  3  Car.  &  P.  244;  Bank  of  Washington  v.  Trip- 
lett,  1  Pet.  25;  House  v.  Adams,  48  Pa.  St.  261;  Walker  v.  Stetson,  19  Ohio 
St.  400;  Bank  of  Burlington  v.  Raymond,  12  Vt.  401;  Bachellor  v.  Priest,  12 
Pick.  399;  ORR  v.  MAGINNI.S.  7  East,  362;  Goodall  v.  Dolly,  1  Term  R.  713. 
"In  relation  to  a  bill  payable  at  a  day  certain,  as  at  a  fixed  time  after  its  date, 
it  is  perfectly  well  settled  not  only  in  this  country  and  in  England,  but  also  in 
Scotland,  and  in  France,  that  the  drawer  or  indorser  of  the  bill  is  not  dis- 
charged by  the  neglect  of  the  holder  to  present  the  same  for  acceptance  im- 
mediately, or  until  the  time  when  it  becomes  due  and  payable."  Opinion  in 
ALIJ^N  V.  SUYDAM,  20  Wend.  (N.  Y.)  321,  323.  "Where  presentment  is  op- 
tional, the  object  of  presenting  is:  (1)  To  obtain  the  acceptance  of  the  draAvee, 
and  thereby  secure  his  liability  as  a  party  to  the  bill;  (2)  to  obtain  an  im- 
mediate right  of  recourse  against  antecedent  parties  in  case  the  bill  is  dis- 
honored by  non-acceptance."  Clialm.  Bills  Exch.  (4th  Ed.)  132.  In  PI^TO  v. 
REYNOLDS,  27  N.  Y.  586,  where  a  bill  payable  one  day  after  date  was  pre- 
sented for  acceptance  on  the  day  it  matured,  refusal  to  accept  was  held 
equivalent  to  refusal  to  pay,  and  to  render  a  demand  for  paymi'ut  unneces- 
sary. Wright,  J.,  said:  "It  is  well  set  lied  that  the  holder  of  a  bill  payable  a 
specified  time  after  date,  or  on  a  certain  day,  need  not,  for  the  i)urpose  of 
charging  the  drawers  and  iiidorsers,  present  it  for  acceptance  until  it  becomeg 
due  and  payable.    It  may  be  presented  befure  or  at  the  time  of  maluiity." 


342  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  (Ch.   9" 

theless  the  drawer  and  indorser  make  a  contract  that  the  drawee 
shall  pay  it  when  duly  presented  for  payment. 

Presentment  for  non-acceptance,  except  in  the  case  of  sight  bills, 
is  thus  only  for  the  security  of  the  holder.  He  has  the  option  of 
seeking  from  the  drawer  and  indorser  a  remedy  for  non-acceptance 
or  a  remedy  for  non-payment.  If  by  protest  and  notice  of  non-ac- 
ceptance he  has  put  himself  in  a  condition  to  sue  the  drawer  and 
indorser,  he  may,  as  a  matter  of  prudence,  retain  the  bill,  and  en- 
deavor to  obtain  payment  from  the  drawee  when  the  bill  has  ar- 
rived at  maturity,  and  not  involve  himself  in  a  litigation  until  there 
has  been  a  failure  of  payment  as  well  as  of  acceptance,^''  But  by 
non-acceptance,  followed  by  protest  and  notice  of  dishonor,  an  im- 
mediate right  of  action  accrues  to  the  holder  against  both  the  draw- 
er and  indorsaer.^'  And  in  all  these  cases  the  contracts  of  the  draw- 
er and  indorsers  stand  upon  a  similar  footing.^* 

12  WHITEHEAD  v.  WAIJKER,  9  Mees.  &  W.  506.  In  this  case  It  wa& 
held  that  the  holder  of  a  bill  of  exchange,  on  non-acceptance  and  protest, 
and  notice  thereof,  has  an  Immediate  right  of  action  against  the  drawer,  and 
does  not  acquire  a  fresh  right  of  action  on  the  non-payment  of  the  ibll 
when  due.  The  statute  of  limitations,  therefore,  runs  against  him  from  the 
former,  and  not  from  the  latter,  period. 

i»  Mason  v.  Franklin,  3  Johns.  202;  Weldon  v.  Buck,  4  Johns.  144;  Wat- 
son V.  Loring,  3  Mass.  557;  Union  Bank  v.  Hyde,  6  Wheat.  572;  Sterry  v. 
Robinson,  1  Day,  11;  Thompson  v.  Gumming,  2  Leigh,  321;  Smith  v.  Roach,^ 
7  B.  Men.  17;  Bright  v.  Turrier,  3  Burrows,  1687;  Milford  v.  Mayer,  1  Doug. 
55;  EVANS  v.  GEE,  11  Pet.  80;  LUCAS  v.  LADEW,  28  Mo.  342;  Exeter 
Bank  v.  Gordon,  8  N.  H.  66;  WIXTHOP  v.  PEPOON,  1  Bay  (S.  0.)  468.  See 
Neg.  Inst.  L.  §  248. 

1*  BALLINGALI>S  v.  GLOSTER,  3  East,  481.  It  was  held  in  this  case  by 
Lord  Ellenborough,  C.  J.,  that  "there  is  no  distinguishing  the  case  of  an  in- 
dorser from  that  of  the  drawer,  it  having  been  long  ago  decided  that  every 
indorser  is  in  the  nature  of  a  new  drawer,  every  Indorsement  as  a  new  bill, 
and  that  the  indorser  stands,  as  to  his  indorsee,  in  the  law  merchant,  the 
same  as  the  drawer."  See,  also,  the  case  of  HEYLYN  v.  ADAMSON,  2  Bur- 
rows, 6G9,  where  it  Is  said  by  Lord  Mansfield  that  when  a  bill  of  exchange 
is  Indorsed,  "as  between  the  indorser  and  indorsee,  it  is  a  new  bill  of  ex- 
change, and  the  indorser  stands  in  the  place  of  the  drawer."  See,  also,  the 
opinion  in  the  case  of  SUSE  v.  POMP,  30  Law  J,  C.  P.  75.  In  PECK  v. 
MAYO,  14  Vt.  33,  it  was  said  by  Redfield,  J.:  "No  man,  I  apprehend,  doubta 
that  the  Indorser  of  a  note  or  bill  is  liable,  in  regard  to  the  principal  debt, 
to  the  same  extent  as  the  original  debtor." 


§^  133-140)  PRESENTMENT.  343 

The  following  rules  are  the  principal  ones  relating  to  instruments 
payable  at  or  after  demand  and  at  or  after  sight: 

(1)  Instruments  payable  on  demand  need  not  be  presented  for  ac- 
ceptance, but  they  must  be  presented  for  payment  within  a  reason- 
able time.^^  In  case  of  instruments  payable  after  demand,  the  de- 
mand must  be  made  within  a  reasonable  time. 

(2)  Instruments  payable  at  or  after  sight  must  be  presented  for 
acceptance  or  payment  within  a  reasonable  time.^"  What  is  a  rea- 
sonable time  within  which  to  present  for  acceptance  may  be  affected 
by  the  circumstance  whether  or  not  the  bill  has  been  placed  in  cir- 
culation, for  when  the  bill  has  been  transferred  a  wider  latitude  as 
to  the  time  of  presentment  is  allowed.  This  results  from  the  fact 
that  a  party  receiving  a  negotiable  bill  payable  at  sight  has  a  right 
to  sell  it,  or  to  send  it  elsewhere  for  sale,  and  by  the  exercise  of  this 
right  the  time  of  presentment  is  necessarily  delayed.* 

"Walker  v.  Stetson,  19  Ohio  St.  400,  Johns.  Cas.  Bills  &  N.  89.  A  pur- 
chased a  draft  on  C,  of  New  Yorli,  on  March  17th,  in  Erie,  Pa.  On  March 
27th  he  sold  the  draft  to  a  bank  in  Newark,  N.  J.,  and  the  bank  presented  It 
on  the  28th  of  the  same  month.  Payment  was  refused,  and  the  draft  pro- 
tested. It  was  held  that,  under  the  circumstances,  the  presentment  was  in 
reasonable  time.  NEWARK  BANIvING  00.  v.  NATIONAL  BANK  OP 
ERIE,  63  Pa.  St.  404.     See  Neg.  Inst.  L.  §  4. 

i«  "The  law  is  settled  by  an  unbroken  line  of  decisions  that  all  drafts, 
whether  foreign  or  inland  bills,  must  be  presented  to  the  drawee  within  a 
reasonable  time.  •  *  *  But  what  is  a  reasonable  time,  under  all  the  cir- 
cumstances, is  sometimes  a  most  difficult  question.  The  general  doctrine  is, 
each  case  must  depend  on  its  own  peculiar  facts,  and  be  judged  accord- 
ingly." Scott,  J.,  in  Montelius  v.  Charles,  76  111.  303.  See,  also,  ROBINSON 
V.  AMES,  20  Johns.  (N.  Y.)  147;   Jordan  v.  Wheeler,  20  Tex.  698. 

•MUILMAN  V.  D'EGUINO.  2  H.  Bl.  505,  per  Buller,  J.;  MELDISH  v. 
RAWDON,  9  Bing.  416;  WALLACE  v.  AGRY,  4  Mason,  330,  Fed.  Cas.  No. 
17,096;  ROBINSON  v.  AMES,  20  Johns.  (N.  Y.)  146.  In  WALLACE  v.  AGRY, 
supra,  Story,  J.,  said:  "The  party  who  receives  a  negotiable  bill  payable 
after  sight  has  a  right  to  sell  it  in  the  market  where  he  resides,  or  to  send 
it  to  any  other  place  for  sale.  He  is  not  bound  personally  to  make  a  re- 
mittance of  it,  or  to  send  it  directly  to  the  country  on  which  it  is  drawn. 
He  is  at  full  liberty  to  put  it  In  circulation,  or  to  send  it  to  any  other  place 
for  sale  or  remittance;  and  the  only  limitation  upon  this  right  is  that  he 
shall  have  It  presented  within  a  reasonable  time,  be  the  conveyance  direct 
or  indirect.  •  •  •  [He]  is  not  at  liberty  to  send  It  to  very  remote  places, 
wholly  out  of  the  course  of  trade,  if  there  be  unreasonable  delay  thereby 


o44  PRESENTMENT    AND    NOTICE   OF    DISHONOR.  (Cll.   9 

Time  of  Presentment. 

The  reason  why  bills  payable  on  demand  and  at  sijjht  differ  in 
tlie  necessity  for  tlieir  presentment  for  acceptance  is  from  the  dif- 
fei'ence  of  mejiiiing  of  the  terms  embodied  in  the  contract.  The 
term  "demand"  is  construed  to  mean  forthwith  upon  presentment. 
The  common-law  theory  was  that  even  demand  was  unnecessary,  be- 
cause it  evidenced  a  debt  in  piwsenti  where  the  debt  itself  was  pre- 
<!edi*nt  to  any  demand."  llence,  demand  notes  and  instruments  ot 
that  character  were  not,  in  general,  entitled  to  grace.^'  But  "at 
sij,'ht''  means  the  same  thing  as  "upon  acceptance."  And,  as  a  gen- 
eral thing,  a  bill  or  note  paj^able  at  sight  or  after  sight  does  not 
become  due  until  it  is  seen  or  accepted.^'  Hence,  bills  payable  at 
sight  are  held  to  be  entitled  to  grace,^"  because  they  do  not  become 

in  the  presentment  for  acceptance,  and  thus  fix  the  drawer  with  an  in- 
definite responsibility.  But,  on  the  other  hand,  the  transmission  in  a  direct 
trade  is  not  necessary.  No  one  can  doubt  that  by  the  course  of  trade  many 
bills  of  exchange  drawn  in  Havana  on  England  are  sent  to  the  United 
States  for  remittance  or  sale.  •  *  ♦  It  would  be  a  most  inconvenient 
rule  to  hold  that  such  a  negotiation  of  bills  was  at  the  sole  peril  of  the 
holder."  The  Negotiable  Instruments  Law  provides  (section  241)  that  the 
holder  of  such  a  bill  "must  either  present  it  for  acceptance  or  negotiate  it 
within  a  reasonable  time." 

"  Capp  V.  Lancaster,  Cro.  Eliz.  548;  Rumball  v.  Ball,  10  Mod.  38;  Collins 
V.  Denning,  3  Salk.  227;   15  Vin.  Abr.  103. 

18  1  Pars.  Notes  &  B.  407;  Story,  Prom.  Notes,  §  224;  Story,  Bills,  §  342; 
Cammer  v.  Harrison,  2  McCord,  240;  First  Nat.  Bank  of  Davenport  v.  Price, 
52  Iowa,  570.  3  N.  W.  G39;    Luckey  v.  Pepper,  Morris  (Iowa)  4'JO. 

18  Campbell  v.  French,  6  Term  R.  200,  2  II.  Bl.  163;  Sutton  v.  Toomer,  7 
Barn.  &  C.  416;  Holmes  v.  Kerrison,  2  Taunt.  323;  Sturdy  v.  Henderson,  4 
Barn.  &  Aid.  592.  In  THORPE  v.  BOOTH,  Ryan  &  M.  3SS,  it  was  held 
that  the  statute  of  limitations  did  not  run  against  a  note  payable  24  months 
after  demand  until  demand  bad  been  made.  A  promissory  note  was  made 
in  the  following  form:  "I  promise  to  pay  M.  A.  D.,  or  bearer,  on  demand, 
the  sum  of  £16  at  sight"  Held,  that  no  action  was  maintainable  without 
a  presentment  for  sight,  DIXON  v.  NUTTALL,  1  Cromp.,  M.  &  R.  30G.  As 
holding  that  the  statute  of  limitations  runs  from  the  date  of  a  note  payable 
on  demand,  and  not  from  the  time  of  deniaud,  see  NORTON  v.  ELLAM,  6 
Law  J.  Exch.  121.  In  SANDERSON  v.  BOWES,  14  East,  500,  which  was  an 
action  in  assumpsit  on  a  promissory  note,  it  was  held  that  the  declaration 
must  aver  presentment  at  the  place.  See,  also,  AYlLkR  v.  SHELDON,  12 
Wend.  (N.  Y.)  439. 

so  HART  v.  SMITH,  15  Ala.  807;    Thornburg  v.  Emmons,  23  W.  Va.  325; 


§§  133-140)  PRESENTMENT.  345 

due  until  an  opportunity  for  their  acceptance  is  given,  and,  if  ac- 
cepted, the  acceptor  is  entitled  to  the  usual  extension  of  time  to  pay 
them.  As  a  consequence  of  the  construction  of  these  terms,  bills 
payable  on  demand  need  not  be  presented  at  all  for  acceptance,  but 
need  only  be  presented  for  payment.^^  But  the  law  nevertheless 
limits  the  time  for  which  they  may  be  held  as  a  security,  and  bills 
or  notes  payable  on  demand  must  be  presented  for  payment  within 
a  reasonable  time,  or  else  they  will  be  treated  as  overdue."  If 
transferred  after  a  reasonable  time,  they  are  subject  to  equities,''' 
and  the  transferee  is  charged  with  constructive  notice,  because  the 
term  "demand"  implies  a  short  term.  Such  is  the  general  rule, 
though  there  has  been  conflict  of  authority,  and  in  England  it  has 
been  held,  at  least  in  the  case  of  demand  notes,  that  they  are  not 
overdue  until  after  demand,  or  the  expiration  of  the  statutory  period 
of  limitation.^*  There  has  also  been  much  conflict  as  to  the  time 
when  demand  notes  must  be  presented  in  order  to  charge  indorsers. 
As  to  demand  bills  it  is  held  that  they  must  be  presented  within  a 
reasonable  time."  And  the  same  rule  is  in  the  United  States  gen- 
erally applied  to  demand  notes;  *  but  in  England  and  in  some  of  the 

Jansou  V.  Thomas,  3  Doug.  421;  Daniel,  Neg.  Inst.  §  617.  Neg.  Inst.  L.  § 
145,  as  enacted  in  most  states,  abolishes  grace.  By  the  act  (section  26)  "at 
sigl^t"  is  made  equivalent  to  "on  demand."     Cf.  Id.  §  240. 

»i  Daniel,  Neg.  Inst.  §  454.    See  Neg.  Inst.  L.  §  240. 

«2  HERRICK  V.  WOOLVERTON,  41  N.  Y.  581;  Crim  v.  Starkweather,  88 
N.  Y.  339;  Furman  v.  Haskin,  2  Calnes,  369;  Loomis  v.  Pulver,  9  Johns. 
244;  RANGER  v.  OARY,  1  Mete.  (Mass.)  369;  Cromwell  v.  Arrott,  1  Serg.  & 
R.  180.  It  is  to  be  noted  that  the  term  "with  interest"  does  not  vary  this 
construction  as  to  the  maker  or  acceptor.  HERRICK  v.  WOOLVERTON, 
supra;    Ch-im  v.  Starkweather,  88  N.  Y.  339. 

28  Wethey  v.  Andrews,  3  Hill,  582;  Sice  v.  Cunningham,  1  Cow.  397;  La 
Due  V.  Bank.  31  Minn.  33,  16  N.  W.  426.     See  Neg.  Inst.  L.  §  92. 

2*  BROOKS  V.  MITCHELL,  9  Mees.  &  W.  15;  Gascoyne  v.  Smith,  1  McClel. 
&  Y.  338. 

2  0  National  Newark  Banking  Co.  v.  Second  Nat.  Bank,  63  Pa.  St.  404; 
PARKER  V.  REDDICK,  65  Miss.  242,  3  South.  575;  MORGAN  v.  U.  S..  113  U. 
S.  470,  5  Sup.  Ct.  588. 

♦  FIELD  V.  NICKERSON,  13  Mass.  131;  Martin  v.  Winslow,  2  Mason,  241, 
Fed.  C;is.  No.  n.l71i;  KEYES  v.  FENSTERMAKER,  24  Cal.  329;  Lindsey  v.  Mc- 
Clelland, 18  Wis.  48L 


346  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  (Cll.   9 

states  demand  notes,**  at  least  if  payable  with  interest,!  have  been 
considered  to  be  upon  a  diirerent  footing,  upon  the  theory  that  they 
are  intended  to  be  continuing  securities.  The  Negotiable  Instru- 
ments Law  t  provides  that,  where  the  instrument  is  payable  on  de- 
mand, "presentment  must  be  made  within  a  reasonable  time  after 
its  issue,  except  that,  in  the  case  of  a  bill  of  exchange,  presentment 
for  payment  will  be  sufficient  if  made  within  a  reasonable  time  after 
the  last  negotiation  thereof." 

In  cases  of  instruments  payable  at  sight,  or  at  a  certain  time 
after  sight,  where  presentment  for  acceptance  is  a  prerequisite,  pre- 
sentment for  acceptance  is  needed  in  order  to  determine  the  day  of 
payment.^'  In  case  of  instruments  payable  after  demand,  present- 
ment must  be  made  for  the  same  reason.  Here  the  same  rule  is 
adopted  for  the  measure  of  time  allowed  for  presentment  as  in  case 
of  the  presentment  for  payment  of  bills  and  notes  payable  on  de- 
mand, namely,  that  such  instruments  must  be  presented  within 
a  reasonable  time.  The  language  of  the  cases  implies  a  difference 
in  the  liability  of  the  drawer  and  indorsers,  though  a  sufficient 
reason  for  it  does  not  appear.  For  it  is  said  that  otherwise  the 
drawer  or  indorser  will  be  discharged  in  case  of  presentment  for 
acceptance,  and  that  they  have  an  interest  in  having  the  bill  accepted 
immediately  and  i)aid  according  to  the  terms  of  the  contract.  It 
would  be  a  wrong  to  subject  them  to  indeterminate  delay  in  the 
terms  of  payment  which  they  have  guarantied.  For  they  might 
not  be  able  to  protect  themselves  by  other  means  before  it  is  too 
late,  if  the  bill  or  note  is  not  accepted,  or  accepted  and  paid,  within 
the  time  of  payment  contemplated  by  them.^^      It  would  seem  also 

•♦  BROOKS  V.  MITCHELL,  9  Mees.  &  W.  15;  Gascoyne  v.  Smith,  1  McClel. 
&  Y.  3S8. 

tMKRRITT  V.  TODD,  23  N.  Y.  28;  Parker  v.  Stroud,  98  N.  Y.  379; 
SHUTTS  V.  FLXGAR.  100  N.  Y.  530,  3  N.  E.  588.  Thielman  v.  Gueble,  32  La. 
Ann.  2G0:  TURNER  v.  MINIX(;  CO..  74  Wis.  355,  43  N.  W.  149;  Leonard  v. 
Olson,  99  Iowa,  1G2.  G8  N.  W.  677,  contra. 

t  Section  131. 

28  Mullick  V.  Radaklssen,  9  Moore,  P.  C.  60,  28  Eng.  Law  &  Eq.  80;  Fry  v. 
Hill,  7  Taunt.  397.     And  see  cases  v\Uh\  supra,  p.  341. 

27  ALLEN  V.  SUYDAM,  20  Wend.  (N.  Y.)  :!21;  AYMAR  v.  BEERS,  7  Cow. 
(N.  Y.)  705,  and  cases  cited  supra,  p.  341. 


^  133-140)  PRESENTMENT.  347 

that  this  rule  applied  also  to  cases  of  presentment  of  such  instru- 
ments for  their  payment 

The  exact  application  of  the  meaning  of  a  reasonable  time  is  not 
clear,  for  the  question  is  as  yet  an  unsettled  one.  It  has  been  the 
subject  of  discussion  in  the  courts.  No  absolute  measure  of  this 
reasonable  time  has  been  fixed.  The  following  times  have  been 
held  reasonable:  A  day  or  two,^*  seven  days,^'  a  month;'"'  the 
following  unreasonable:  Eight  months,*^  three  and  one-half 
months,^^  two  months  and  a  half  By  some  courts  it  is  deemed  a 
question  of  fact,'*  and  the  province  of  the  jury  to  decide;  by  others, 
one  of  law,  for  the  court  to  decide.'"  The  better  opinion  would  seem 
to  be  that  it  is  a  question  for  neither  the  jury  nor  the  court  to  decide 
wholly,  and  yet  a  question  in  whose  determination  both  the  jury 
and  the  court  must  take  part,  ''What  is  a  reasonable  time,"  said 
Judge  Byles,"  "depends  on  the  circumstances  of  each  particular  case, 
and  is  a  mixed  question  of  law  and  fact,  although  reasonable  time 

28  FIELD  V.  NICKERSON,  13  Mass.  131-137.  In  this  case  It  was  held  that 
"the  condition  on  which  the  indorser  is  liable  is  that  payment  shall  be  de- 
manded within  a  reasonable  time,  and  the  earliest  notice  possible  given  of 
refusal.  This  time  may  therefore  vary  according  to  the  circumstances  and 
situation  of  the  parties,  to  be  determined  by  the  jury,  under  the  direction 
of  the  court.     It  is  Impossible  to  fix  any  precise  period." 

28  Thurston  v.  M'Kown,  6  Mass.  428. 

80  RANGER  v.  GARY,  1  Mete.  (Mass.)  369. 

«i  American  Bank  v.  Jenness,  2  Mete.  (Mass.)  288. 

82  Stevens  v.  Bruce,  21  Pick.  193. 

88  LOSEE  V.  DUNKIN,  7  Johns.  (N.  Y.)  70.  See,  also,  collated  cases.  Tied. 
Com.  Pap.  §  216,  note. 

8*  WAIJ.ACE  V.  AGRY,  4  Mason,  336,  Fed.  Cas.  No.  17,096;  Fry  v.  Hill,  7 
Taunt.  397.  In  MUILMAX  v.  D'EGUINO,  2  H.  Bl.  553,  the  following  was 
part  of  the  opinion  delivered  by  Eyre,  0.  J.:  "I  think,  indeed,  that  the  holder 
Is  bound  to  present  the  bill  in  reasonable  time.  In  order  that  the  period  may 
commence  from  which  the  payment  is  to  take  place.  The  question  what  Is 
reasonable  time  must  depend  on  the  particular  circumstances  of  the  case 
and  it  must  always  be  for  the  jury  to  determine  whether  any  laches  Is  Im 
putable  to  the  plaintiff."  Fernandez  v.  Lewis,  1  McCord,  322;  Nichols  v 
Black  more,  27  Tex.  586;    Barbour  v.  Fullerton,  30  Pa.  St.  105. 

85AY.MAR  V.  BEERS,  7  Cow.  (N.  Y.)  707;  Edw.  Bills  &  N.  §§  539-546 
Sice  v.  Cunningham.  1  Cow.  (N.  Y.)  397;  POORMAN  v.  MILLS,  39  Cal.  345; 
Caril  V.  Brown,  2  Mich.  401;   Sylvester  v.  Crupo,  15  Pick.  (Mass.)  93. 

8«  Wood's  Byles,  Bills,  p.  183. 


348  PRESENTMENT    AM)    NOTICE    OF    DISHONOR.  (Ch.  9 

in  {jenerul,  and  roasoiuible  time  for  giving  notice  of  dishonor  in 
particular,  is  a  question  of  law."  In  Muilman  v.  D'Eguino*^  Lord 
Chief  Justice  Ejre  explains  the  meaning  of  this  somewhat  vague 
expression  bj  saying  that  "what  is  a  reasonable  time  must  depend 
on  the  particular  circumstances  of  the  case;  and  it  must  always  be 
for  the  jury  to  determine  w'hether  any  laches  is  imputable  to  the 
plaintiff;"  and  the  later  cases  have  developed  fully  his  meaning. 
That  a  reasonable  time  is  a  mixed  question  of  law  and  fact  means 
that  the  question  is  to  be  decided  by  the  jury,  under  proper  instruc- 
tions from  the  court  It  may  vary  much,  according  to  the  particular 
circumstances  of  each  case.  If  the  facts  are  doubtful  or  in  dispute, 
it  is  the  clear  duty  of  the  court  to  submit  them  to  the  jury;  but,  when 
they  are  clear  and  uncontradicted,  then  it  is  competent  for  the  court 
to  determine  whether  the  time  required  by  law  for  the  presentment 
has  been  exceeded  or  not," 

Such  being  the  rules  with  reference  to  the  presentment  for  accept- 
ance or  payment  of  bills  and  notes  payable  at  an  ancertain  time, 
contingent  upon  their  being  demanded  or  presented  for  sight  or  ac- 

«T  MUILMAN  V.  D'EGUINO,  2  H.  Bl.  505. 

88  riiESCOTT  BANK  v.  CAVERLY.  7  Gray  (Mass.)  217.  In  the  case  of 
MOOIiE  V.  WARUEN,  1  Strange,  415,  It  was  held  that,  if  the  party  who 
receives  a  goldsmith's  bill  tenders  it  the  next  day,  it  is  not  his  loss  if  the 
goldsmith  fails.  As  holding  tliat  the  common  usage  in  such  affairs  is  to 
be  regarded,  see  TURNER  v.  MEAD,  Id.  41G.  In  MANWARING  v.  HAR- 
RISON, Id.  5U8.  it  was  held  that  a  person  who  did  not  demand  a  goldsmith's 
note  in  two  days  took  the  credit  on  himself.  See,  also,  OOLEMAN  v. 
SAYER,  1  Barnard.  303.  In  the  case  of  IIANKEY  v.  TROTMAN,  1  W.  BI. 
1,  Lee,  C.  J.,  held  that  "it  is  a  question  of  fact  whether  there  was  convenient 
time  allowed  for  receiving  the  money";  and  Denison,  J.,  was  of  the  opinion 
that  "the  question  is  whether  the  plaintiff  lias  used  a  reasonable  diligence 
or  not.  This  the  jury  are  to  judge  of."  In  PATIENCE  v.  TOWNLEY,  2 
J.  P.  Smith  (Eng.)  223,  it  was  held  that  where  it  was  impossible  to  present 
the  bill  in  due  time,  but  where  such  bill  was  afterwards  presented  with  due 
diligence,  and  was  refused  for  want  of  due  presentation,  the  holder  micht 
recover  against  antecedent  parties.  In  RlCKFORD  v.  RIDGE,  2  Camp.  537, 
It  was  the  opinion  of  Lord  Eilenborough  that  "it  is  always  to  be  considered 
whether,  under  the  circumstances  of  the  case,  the  cheque  has  been  pre- 
sented with  due  diligence.  •  •  •  It  seems  to  me  to  be  convenient  and 
reasonable  that  chequea  received  in  the  course  of  one  day  should  be  pre- 
sented the  next." 


§§  133-140)  PRESENTMENT.  349 

ceptance,  it  remains  to  speak  of  the  rules  regulating  the  present- 
ment for  payment  of  bills  and  notes  due  at  a  given  time,  at  what 
time  of  day  they  are  to  be  presented  for  payment,  and  the  effect  of 
the  theory  of  grace  in  extending  the  time  of  the  payment,  as  well 
as  those  payable  at  or  after  sight,  beyond  the  time  stipulated  in  the 
contract.  The  bills  and  notes  payable  at  a  given  date,  or  at  a  given 
time  after  date,  or  after  demand,  or  after  sight,  must  be  presented 
when  by  the  terms  of  the  contract  they  are  due.^*  In  general,  this 
does  not  mean  the  day  expressly  stipulated  in  the  contract,  but  it 
means  that  day  with  the  additional  days  implied  by  the  grace  of  the 
law  merchant. 

Lord  Holt,  in  1701,  in  TASSELL  v.  LEWIS,"  thus  expounds  the 
rule:  *'In  case  of  foreign  bills  of  exchange,  the  custom  is  that  three 
days  are  allowed  for  payment  of  them;  and,  if  they  are  not  paid  up- 
on the  last  of  the  said  days,  the  party  ought  immediately  to  protest 
the  bill  and  return  it,  and  by  this  means  the  drawer  will  be  charged. 
But,  if  he  does  not  protest  it  on  the  last  of  the  three  days,  which 
are  called  the  'days  of  grace,'  there,  although  he  upon  whom  the  bill 
is  drawn  fails,  the  drawer  will  not  be  chargeable,  for  it  shall  be 
reckoned  his  folly  that  he  did  not  protest.  But  if  it  happens  that 
the  last  day  of  the  said  three  days  is  a  Sunday  or  a  great  holiday, 
as  Christmas  Day,  upon  which  no  money  used  to  be  paid,  there  the 
party  ought  to  demand  the  money  upon  the  second  day;  and,  if  it 
be  not  paid,  he  ought  to  protest  the  bill  the  second  day;  otherwise, 

«»Thus,  in  the  case  of  ANDERTON  v.  BECIC,  16  East.  248,  the  plaintiff 
received  on  the  2(jth  of  December  a  bill  due  on  the  28th,  but  kept  it  until  the 
29th,  when  he  sent  it  for  presentment.  The  bill  was  dishonored,  and  it  was 
held  that  the  plaintiff  was  guilty  of  laches  in  keeping  the  bill  until  the  2nth. 
In  WILLIAMS  v.  SMITH,  2  Barn.  &  Aid.  496,  it  was  held  that  the  true  rule 
is  that  a  party,  in  order  to  avoid  laches,  must  give  notice  by  the  next  day's 
post.  In  the  case  of  POCia.INGTOX  v.  SILVESTER,  Chit.  Bills  (10th  Ed.) 
340,  note  10,  it  was  held  to  be  established  as  a  rule  of  law  that  a  party  re- 
ceiving a  check  on  a  banker  has  the  whole  of  the  banking  hours  of  next 
day  In  which  to  present  such  check  for  payment.  As  to  the  allowance  of 
a  reasonable  time  for  presentment,  by  an  administrator,  of  a  bill  found 
among  papers  of  the  deceased  holder,  see  WIIITE  v.  STODDARD,  11  Gray 
(Mass.)  2.>S. 

«•  1  Ld.  Raym.  743» 


OoO  PRESENTMENT  AND  NOTICE  OF  DISHONOR.  (Ch.  9 

it  will  be  at  his  own  peril,  for  the  drawer  will  not  be  chargeable." 
This  doctrine,  thus  declared  to  be  the  law  merchant  in  ease  of  for- 
eign bills,  has  been  largely  followed  by  courts  of  this  country,  and 
is  probably  the  law,  except  when  it  ia  modified  by  statute.*  It  is, 
however,  very  generally  modified  by  statute.  For  as  the  common- 
law  rule  stands,  since  grace  was  a  mere  indulgence,  and  not  a  right, 
it  was  not  extended  beyond  the  term  of  indulgence  allowed  for 
grace.  Thus,  if  grace  expired  on  Sunday,  the  instrument  would  fall 
due  on  Saturday,*^  and  if  that  Saturday  was  a  public  holiday  the 
instrument  would  fall  due  on  Friday.*^'  But  this  has  been  changed 
by  the  statutes  of  the  various  states  to  the  rule  which  governs  bills 
or  notes  payable  without  grace,  which  allows  payment  on  the  next 
succeeding  business  day,  because,  the  debtor  not  being  compelled  to 
do  business  or  make  payment  on  a  holiday,  the  next  day  is  the  first 
legal  time  at  which  the  creditor  can  demand  payment*'  These 
rules  apply  alike  to  foreign  and  inland  bills  and  promissory  notes,** 
and  to  paper  payable  in  installments,  grace  being  allowed  upon  each 
installment.*' 

The  day  at  which  presentment  for  acceptance  or  for  payment  is  to 
be  made  being  fixed,  the  courts  lay  down  a  series  of  rules  which  are 
quite  explicit  in  stating  the  hours  of  the  day  at  which,  under  va- 
rious circumstances,  presentment  for  acceptance  or  payment  is  to 
be  made.     The  general  rule  is  that  presentment  should  be  made  dur- 

•  See  Neg.  Inst.  I>.  §  145. 

<i  BUSSARD  V.  LEVERING,  6  Wheat.  102;  KUNTZ  v.  TEMPEL,  48  Mo. 
75;  BARREIT:  v.  ALLEN,  10  Ohio,  42G;  Reed  v.  Wilson,  41  N.  J.  Law,  29. 
"When  days  of  grace  are  allowed  on  a  bill  or  note,  and  the  third  day  falls 
on  Sunday,  the  bill  or  note  is  payable  on  the  previous  Saturday."  Per  Bron- 
son,  J.,  in  SALTER  v.  BURT,  20  Wend.  2()5.  In  BOWEN  v.  NEWELL,  8  N. 
Y.  190,  it  was  held  that  whether  days  of  grace  should  be  allowed  was  de- 
pendent upon  whether  the  instrument  was  payable  on  demand  or  at  a  fu- 
ture date. 

42  Story,  Bills,  §  338. 

43  AVERY  V.  STEWART,  2  Conn.  69;  SALTER  v.  BURT,  20  Wend.  (N.  Y.) 
205;    Ck)lms  v.  Bank,  4  Baxt.  (Tenn.)  422;    SANDS  v.  LYON,  18  Conn.  18. 

44  Bank  of  Washington  v.  Triplett,  1  Pet.  25;  OGDEN  v.  SAUNDERS,  12 
Wheat  213;  BROWN  v.  HARRADBN,  4  Term  R.  148;  Cook  v.  Darling,  2  R. 
1.  385;    Beck  v.  Thompson.  4  Har.  &  J.  531. 

*B  ORIDGE  V.  SHERBORNE,  11  Mees.  &  W.  374. 


§§  133-140)  PRESENTMENT.  351 

ing  usual  and  reasonable  hours.f  With  business  men  the  legal 
meaning  of  "usual  and  reasonable  hours"  is  any  time  during  the 
proper  hours  of  business.  These  vary,  and  generally  range  through 
the  whole  day  to  bedtime,  in  the  evening.*'  They  are  ciassitied  as 
follows: 

(1)  Presentment  at  a  bank  should  be  during  banking  hours,*^  but 
if  made  after  banking  hours,  to  the  proper  authorities  in  the  bank, 
it  is  sufficient.** 

(2)  Presentment  at  a  place  of  business,  during  the  usual  business 
hours,*®  though  a  demand  to  any  proper  person  at  a  place  of  business 
after  business  hours  is  sufficient''" 

^3)  Presentment  at  one's  residence  between  the  usual  hours  of 

tSee  Neg.  Inst  L.  §f  132,  135  (presentment  for  payment);  section  242  (for 
acceptance). 

*8  CAYUGA  CO.  BANK  v.  HUNT,  2  Hill.  635. 

*7  Elford  V.  Teed,  1  Maule  &  S.  28;  PARKER  v.  GORDON,  7  East  385  (in 
this  case  it  was  held  that  if  a  bill  be  accepted  payable  at  A's,  who  is  the 
acceptor's  banker,  the  party  taliing  such  special  acceptance,  which  he  is  not 
bound  to  do,  thereby  impliedly  agrees  to  present  it  for  payment  within  the 
usual  banking  hours  at  the  place  where  it  is  made  payable);  Staples  v. 
Franklin  Bank,  1  Mete.  (Mass.)  43;    Thorpe  v.  Peck.  28  Vt.  127. 

*8  In  the  case  of  SALT  SPRINGS  BANK  v.  BURTON,  58  N.  Y.  432.  it  was 
shown  that,  upon  the  day  the  note  was  due,  the  indorser,  being  prepared  to 
pay  it,  sent  the  maker  to  the  bank  during  banking  hours  to  ascertain  the 
amount.  The  note  was  presented  for  payment,  an  hour  after  the  close  of 
banking  hours,  by  the  holder,  to  the  cashier,  and  payment  demanded.  This 
was  refused  on  the  ground  that  there  were  no  funds  deposited  for  the  pur- 
pose. It  was  held  that  the  indorser  was  charged  by  such  demand.  And 
see  Bank  of  Syracuse  v.  Ilollister,  17  N.  Y.  4t>;  BANK  OF  UTICA  v.  SMITH, 
18  Johns.  (N.  Y.)  230;  Flint  v.  Rogers,  15  .Me.  (57;  CROOK  v.  J.VDIS.  G  Car. 
&  P.  101;  Commercial  Bank  v.  Hamer,  7  Uow.  (Miss.)  448;  Cohea  v.  Hunt 
2  Smedes  &  M.  227;  Shepherd  v.  Chamberlain,  8  Gray  (Mass.)  225;  BANK  OF 
UTICA  V.  PHILIPS,  3  Wend.  (N.  Y.)  408. 

*»  Lunt  V.  Adams,  17  Me.  230;  Wallace  v.  Crilley,  40  Wis.  577.  1  N.  W, 
301;  Triggs  v.  Newnham,  1  Car.  &  P.  631;  Strong  v.  King,  35  111.  9.  Johns. 
Cas.  Bills  &  N.  93. 

80  Henry  v.  Lee,  2  Chit  124;  GARNETT  v.  WOODCOCK,  6  Maule  &  S.  44.  In 
this  case  a  presentment  of  a  bill  of  exchange  at  the  banking  house  where 
payable,  after  banking  hours,  Is  sufficient  If  a  person  be  stationed  at  the 
banking  Louse,  and  return  answer  of  "No  orders." 


862  PRESENTMENT    AND    NOTICE    OF    DISHOKO*.  (Ch.  9 

fisinjj  and  retiring."     But  it   is  sufficient  if  made  upon  the  ac- 
cei)tor  or  maker  personally  at  any  time.** 

In  addition  to  this  general  classification,  there  are  other  consid- 
erations, depending  largely  upon  the  circumstances  of  each  partic- 
ular casa  The  principal  ones  are  the  usage  of  trade,  and  the  loca- 
tion of  the  domicile  of  the  person  to  whom  presentment  is  to  be 
made."*  But  the  general  principle  underlying  these  considera- 
tions is  that  the  person  making  the  presentment  should  use  due  and 
proper  diligence,  and  that  the  presentment  should  be  made  at  such 
a  time  of  day  that  the  person  expected  to  make  the  payment  or  give 
the  acceptance,  in  the  exercise  of  ordinary  business  prudence,  can- 
not be  supposed  to  have  been  taken  off  his  guard  or  caught  with 
out  funds.  It  is  almost  needless  to  add  that  presentment  at  an  im- 
proper time,  as  a  legal  act,  is  a  nullity.'*  And  that  the  demand  for 
payment  may  be  made  at  any  time  within  the  proper  period,  al- 
though the  acceptor  or  maker  has  the  whole  of  the  day  to  make  the 
payment.  If  he  is  ready  to  pay  on  the  same  day  after  a  demand 
has  been  made,  at  the  proper  time  he  must  seek  the  creditor  and 
tender  payment''  The  elfect  of  the  demand  upon  the  liability  of 
the  di.stinct  contracts  of  the  maker  and  acceptor  and  oi  tiie  uiuwcr 
and  indorser  will  be  examined  subsequently." 

»i  SAJ.T  SPRINGS  BANK  V.  BURTON,  58  N.  Y.  430;  Nelson  v.  Fotterall. 
7  Loijrh.  179;  Skelton  v.  Dustln,  92  111.  49.  In  the  case  of  BARCLAY  v. 
BAILEY,  2  Camp.  527,  It  was  held  that  the  presentment  of  a  bill  of  ex- 
change for  payment  at  the  house  of  a  merchant  at  8  o'clock  in  the  evening 
of  the  day  It  became  due  was  sufficient  to  charge  the  drawer.  Dana  v. 
Sawyer.  22  Me.  244. 

62  FARNSWOKTH  T.  ALLEN,  4  Gray  (Mass.)  453;  King  v.  Crowell,  Johns. 
Cas.  Bills  &  N.  91. 

68  Notes  to  Bigelow,  Cas.  Bills  &  N.  246. 

64  JOHNSON  V.  HAIGHT,  13  Johns.  (N.  Y.)  470;  WIPFEN  v.  ROBERTS, 
1  Esp.  2IU1;  Mitchell  v.  De  Grand.  1  Mason,  176,  Fed.  Cas.  No.  9.G()1;  Walsh 
V.  Dart,  12  Wis.  635;  Kohler  v.  Montgomery,  17  Ind.  220;  Leavitt  v.  Simes, 
3  N.  H.  14.  In  the  case  of  Dana  v.  Sawyer.  22  ile.  244,  It  was  held  that 
presentment  at  nearly  midnight  to  the  maker,  after  the  latter  had  retired, 
would  not  be  sufficient,  unless  there  was  a  waiver,  or  unless  It  was  shown 
that  payment  would  not  have  been  made  on  a  demand  at  a  proper  hour. 

66  1  Tars.  374;   Rand.  Com.  Paper,  §  1092. 

66  See  post,  p.  360  et  seq. 


§§  133-140)  PRESENTMENT.  353 

Place  of  Presentment. 

The  next  step  in  our  examination  of  the  subject  of  presentment 
is  the  place  where  it  is  made.*  The  underlying  principles  are  much 
the  same  in  case  of  presentment  for  acceptance  and  of  presentment 
for  payment,  though  in  case  of  presentment  for  payment  a  very 
prominent  element  is  that  some  place  of  payment  is  usually  indi- 
cated in  the  instrument  which  becomes  an  important  stipulation 
and  term  of  the  contract."^  But  if,  in  case  of  a  bill,  some  place 
where  the  drawee  is  to  be  found  to  accept  the  bill  appear  on  its 
face,  the  specific  direction  as  to  the  place  is  a  warranty  or  contract 
on  the  part  of  the  drawer  that  a  drawee  shall  be  found  at  that  place 
capable  of  accepting,  and  a  presentment  there  is  sufficient,  although 
the  place  is  closed,^^  or  the  drawee  has  never  resided  in  the  place 
named,  or  although,  if  addressed  to  a  city  or  town  generally,  his  ex- 
act place  of  residence  is  unknown/'  This  last  rule  is,  however, 
disputed,  the  adverse  cases  "*  holding  that  the  drawer  should  not 
be  subjected  to  the  penalties  of  dishonor  by  the  chance  absence  of 
the  drawee  from  the  place  indicated,  but  that  the  holder  should 
make  diligent  inquiry  for  him,  and  seek  to  present  the  bill  person- 
ally before  he  protests  it"^  However  this  may  be,  if  no  place  is  in- 
dicated on  the  face  of  the  bill  for  the  presentment  for  its  accept- 
ance such  presentment  may  be  made  either  to  the  drawee  person- 
ally,*^ or,  this  being  impracticable,  first  at  his  place  of  business, 

♦See  Neg.  Inst,  L.  §  133. 

6  7  In  HODGE  v.  FILLIS,  3  Camp.  4G3,  it  was  held  that,  where  a  particular 
place  of  payment  is  denoted  in  a  bill  by  both  drawers  and  acceptors,  it  is  a 
term  of  the  contract  between  the  parties,  and  that  an  averment  that  the  bill 
was  presented  there  for  payment  must  be  made.  In  Williams  v.  Waring,  10 
Barn.  &  C.  2,  it  was  held  that  a  memorandum,  in  the  margin  of  a  note,  that 
it  is  payable  at  a  certain  place,  is  not  to  be  considered  part  of  the  contract, 
and  presentment  at  that  place  need  not  be  averred  or  proved. 

58  ANONYMOUS,  1  Ld.  Raym.  743;  Wolfe  v.  Jewett,  10  La.  383;  RatcliCf 
v.  Planters'  Bank,  2  Sneed  (Tenn.)  425. 

6  b  Union  Bank  v.  Fowlkes,  2  Sneed  (Tenn.)  555. 

60  Bank  of  Washington  v.  Triplett,  1  Pet.  25,  34;  Wiseman  v.  Chiapella,  23 
How.  3<]8-377.  • 

«i  In  the  case  of  Bank  v.  Orvis,  42  Iowa,  G91,  It  was  held  that,  where  thi. 
maker  of  a  note  has  no  place  of  business,  a  demand  made  at  his  place  of  ros»- 
dence  is  sufficient,  even  though  he  is  not  at  home. 

«2  Mason  v.  Franklin,  3  Johns.  201.  A  notice  sent  by  a  bank  where  a  note 
NEG.  BILLS.— 23 


354  PRESENTMENT    AND    NOTICE    OF   DISHONOR.  (Ch.  9 

and  then  at  his  place  of  residence,  if  that  is  known."^  Of  these  two 
places,  it  is  thought  that  the  place  of  business  should  be  first  sought 
out  by  the  holder/*  and  it  is  generally  agreed  that,  if  the  drawee's 
place  of  business  or  residoni-e  cannot  be  ascertained,  the  holder 
may  treat  the  bill  as  dishonored,  and  protest  for  non-acceptance, 
provided,  always,  that  he  uses  due  diligence  to  ascertain  them.^'* 
In  case  of  presentment  for  payment,  the  rules  are  governed  by  the 
same  general  principles.!     These  rules  are: 

(1)  If  the  instrument  is  made  payable  at  a  particular  place,  the 
presentment  need  not  be  personal,  but  is  sufficient  if  made  at  the 
l)lace  stipulated. 

has  been  left  for  collection,  directing  the  maker  to  call  and  pay  It,  Is  not  pre- 
sentment. BARNES  V.  VAUGHAN,  6  R.  I.  259.  "The  practice  in  Massachu- 
setts and  Maine  to  the  contrary  (Mechanics'  Bank  v.  Merchants'  Bank,  6  Mete. 
24;  Wan-en  Bank  v.  Parker,  8  Gray,  221)  must  be  regarded  as  provincial."  2 
Ames.  Cas.  Bills  &  N.  862. 

63  ANDERSON  v.  DRAKE,  14  Johns.  (N.  Y.)  113.  In  this  case,  Thompson, 
C.  J.,  said:  "I  am  inclined  to  think  that  where  a  note  Is  not  made  payable  at  any 
particular  place,  and  the  maker  has  a  known  and  permanent  residence  within 
the  state,  the  holder  is  bound  to  make  a  demand  at  such  residence  in  order  to 
charge  the  indorser." 

64  Tied.  Com.  Paper,  §  213.  "I  have  no  doubt,  where  a  person  has  an  office 
or  known  and  settled  place  of  business  for  the  transaction  of  his  moneyed  con- 
cerns, •  •  ♦  a  presentment  and  demand  at  that  place  (as  well  as  a  pre- 
sentment and  demand  at  his  residence)  is  good  in  law."  Dayton,  J.,  in  SUS- 
SEX BANK  V.  BALDWIN,  17  N.  J.  Law,  488. 

06  Bateman  v.  Joseph,  12  East,  433;  FREEMAN  v.  BOYNTON,  7  Mass.  483; 
Collins  V.  Butler,  2  Strange,  1087;  Browning  v.  Kinnear,  1  Gow,  81;  HINE  v. 
ALLELY,  4  Barn.  &  Adol.  624.  In  this  case  the  bill  was  taken  to  the  proper 
place,  but  the  house  was  closed. 

t  "Comparing  presentment  for  acceptance  with  presentment  for  payment,  it 
is  clear  that  the  two  cases  are  governed  by  somewhat  different  considerations. 
Speaking  generally,  presentment  for  acceptance  should  be  personal,  while  pre- 
sentment for  payment  should  be  local.  A  bill  should  be  presented  for  payment 
where  the  money  is.  Any  one  can  then  hand  over  the  money.  A  bill  should  be 
presented  for  acceptance  to  the  drawee  himself,  for  he  has  to  write  the  ac- 
ceptance; but  the  place  where  it  is  presented  to  him  is  comparatively  immate- 
rial, for  all  he  has  to  do  is  to  take  the  bill.  Again  (except  in  case  of  demand 
drafts),  the  day  for  payment  is  a  fixed  day;  but  the  drawee  cannot  tell  on 
what  day  it  may  suit  the  holder  to  present  a  bill  for  acceptance.  These  con- 
siderations are  material  as  bearing  on  the  question  whether  the  holder  has 
used  reasonable  diligence  to  effect  preseut-ment."  Chalm.  Bills  Exch.  (4th  E-d.) 
138. 


§§   133-140)  PRESENTMENT.  355 

(2)  If  no  place  of  payment  is  stipulated,  first  at  the  maker's  or 
acceptor's  place  of  business,  and  then  at  his  place  of  residence,  and 
if,  after  due  diligence,  the  maker  or  acceptor,  or  his  place  of  busi- 
ness or  of  residence,  cannot  be  found,  then  the  bill  or  note  may  be 
treated  as  dishonored. 

In  the  first  of  these  rules  the  principle  guiding  the  courts  is  that 
the  acceptor  or  maker  has  contracted  to  have  funds  to  pay  the  in- 
strument when  due  at  a  particular  place,  and  this  contract  the  indorser 
has  ratified.  The  holder  has  a  right  to  rely  upon  this  contract 
in  taking  the  instrument,  and  therefore  his  duty  is  fulfilled  if  he 
is  ready  with  the  instrument  to  receive  payment  of  it  at  the 
place  stipulated.  The  question  involved  in  the  second  rule  is  to 
formulate  the  degree  of  diligence  which  is  necessary  for  a  holder 
to  exercise  to  charge  an  indorser  in  endeavoring  to  procure  payment 
of  the  instrument  from  the  acceptor  or  maker.^*  And  thus  the  facts 
to  be  kept  in  mind  are  the  express  stipulation  of  contract,  in  the 
first  instance,  and,  in  the  second,  the  degree  of  diligence  necessary 
for  the  holder  to  avail  against  the  right  of  the  indorser  to  insist 
upon  a  presentment  to  hold  him  as  a  surety.  When  a  place  of 
payment  is  stipulated  in  the  bill  or  note,  presentment  for  payment 
is  suflficient  to  charge  all  parties  with  liability,  if  made  when  the 
instrument  is  due  at  the  place  stipulated.®^  The  presentment  need 
not  be  personal,®*  The  holder's  part  of  the  contract  is  performed 
if  he,  or  any  one  for  him,  is  at  the  place  of  payment  with  the  paper, 


ee  "The  general  rule  that  payment  must  be  demanded  from  the  maker  of 
a  note,  and  notice  of  its  non-payment  forwarded  to  the  indorser  within  dup 
time,  in  order  to  render  him  liable,  is  so  firmly  settled  that  no  authority  need 
be  cited  in  support  of  it.  *  •  •  Due  diligence  to  obtain  payment  from  the 
maker  is  a  condition  precedent,  on  which  the  liability  of  the  indorser  depends." 
Marshall,  C.  J.,  in  MAGRUDER  v.  BANK,  8  Curt.  Dec.  299,  3  Pet.  87.  See, 
also,  CUNDY  v.  MARRIOTT,  1  Barn.  &  Adol.  G96. 

87  Harris  v.  Packer,  3  l^-rw.  370;  SAUNUERSON  v.  JUDGE,  2  H.  Bl.  509; 
Buxton  V.  Jones,  1  Man.  &  G.  S3;  Bank  of  the  Metropolis  v.  Breut,  2  Cranch, 
€.  C.  530,  Fed.  Cas.  No.  900;  GALE  v.  KEMPER,  10  La.  205.  In  the  case  of 
SAUNDERSON  v.  JUDGE,  2  H.  Bl.  509,  it  was  held  by  the  court  that:  "It  Is 
not  necessary  that  a  demand  should  be  personal.  It  is  suflicient  if  It  be  ma.de 
at  the  house  of  the  maker  of  the  note;  and  it  is  the  same  thing,  in  effect,  if  it 
be  made  at  the  place  where  he  appoints  it  to  be  made." 

««  Nichols  V.  Goldsmith,  7  Wend.  1G2;    Glllett  v.  Averlll,  5  Deuio,  85. 


356  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  (^Cil.    d 

SO  that  he  may  receive  the  money.'"  The  mere  presence  of  the 
instrument  at  the  place  of  payment  is  enough.^"  By  "place  of  pay- 
ment" is  meant  either  the  particular  place  stipulated  as  an  office, 
house/ ^  or  bauk/^  or  the  city  or  town  stipulated,"  provided  per- 
haps, in  the  last  case,  that  the  holder  make  a  reasonable  inquiry 
for  the  acceptor's  or  maker's  address  in  the  city  or  town,  and  cannot 
find  it.''*  The  stipulation  fixing  a  place  of  payment  may  be  in 
writing,  and  created  in  a  bill,  either  by  the  drawer  making  it  pay- 
able at  a  particular  place,  or  by  like  act  of  the  acceptor,  provided 
his  acceptance  does  not  change  the  tenor  of  the  bill.^"  It  may  be 
created  in  writing  in  a  note  by  the  maker  specifying  the  place  at 
the  time  of  execution.  It  may  also  be  created  by  parol  agreement 
of  the  parties  if  it  does  not  change  a  written  stipulation  in  the 
bill  or  note.'"  And  it  may  specify  several  places,  and  designate 
any  of  them  as  the  place  of  payment  of  the  instrument. '''  If  pay- 
ment is  to  be  made  at  any  one  of  several  places,  presentment  may 
also  be  made  at  any  one  of  them,  or  presence  of  the  instrument  at 


«8  Woodin  V.  Foster,  16  Barb.  146. 

TO  Bank  of  Syracuse  v.  Hollister,  17  N.  Y.  46;  Merchants'  Bank  v.  Elderkin. 
25  N.  Y.  178. 

71  PHILPOTT  V.  BRYANT,  3  Car.  &  P.  244. 

7  2  Chicopee  Bank  v.  Philadelphia  Bank,  8  Wall.  641. 

7  3  Meyer  v.  Hibsher,  47  N.  Y.  265. 

7  4  Rand.  Com.  Paper,  §  1114.;   Daniel,  Neg.  Inst.  §  640. 

76  Chalm.  Dig.  art.  166;  Foden  v.  Sharp,  4  Johns.  (N.  Y.)  183;  TROY  CITY 
BANK  V.  LANMAN,  19  N.  Y.  477;  Niagara  Dist.  Bank  v.  Manufacturing  Co., 
31  Barb.  (N.  Y.)  403;   Blair  v.  Bank  of  Tennessee,  11  Humph.  84. 

76  Thompson  v.  Ketcham,  4  Johns.  285;  Meyer  v.  Hibsher,  47  N.  Y.  2G5;  Pear- 
son V.  Bank  of  Metropolis,  1  Pet.  89;   State  Bank  v.  Hurd,  12  Mass.  172. 

7  7  BEECHING  V.  GOWER,  1  Holt,  N.  P.  313.  This  was  a  case  where  a 
banker's  promissory  note  was  made  payable  at  Tunbridge  and  also  at  London. 
The  holder  bad  a  right  to  present  it  at  either  place,  and  if  payment  were 
refused  in  Ix)ndon  it  would  be  no  evidence  of  laches  on  the  part  of  the  holder 
to  prove  that,  if  payment  had  been  demanded  at  Timbridge,  the  nearer  and  more 
convenient  place,  the  bill  would  have  been  paid.  Daniel,  Neg.  Inst.  §§  648-650; 
Tied.  Com.  Paper,  §  314.  Where  a  bill  was  addressed  to  the  drawee  at  a  par- 
ticular place  in  the  city,  and  so  accepted,  and  it  appeared  that  he  had  two 
places  of  business  in  the  city,  a  certificate  of  presentment  "at  the  place  of  busi- 
ness" of  the  acceptor  in  the  city  was  insufficient  BROOKS  v.  HIGBY,  11  Hun 
(N.  Y.)  235. 


§§  133-140)  PRESENTMENT.  357 

any  one  of  them  is  sufficient.  This  is  because  the  aim  of  the  theory 
of  negotiability  is  to  put  the  least  possible  burden  upon  the  holder. 
Tliis  stipulation  is  for  his  benefit.  And  the  maker  or  acceptor, 
who  is  party  to  such  a  stipulation,  must  be  ready  to  pay  the  instru- 
ment at  any  and  all  of  the  places  named  as  places  of  payment  in  it. 
When  a  l^ill  or  note  is  not  made  payable  at  any  particular  place, 
the  general  rule  of  law  is  that,  in  order  to  charge  the  indorser, 
payment  must  be  demanded  of  the  maker  personally,  or,  if  not  per- 
sonally, at  his  place  of  business,  or  at  his  dwelling  place  or  other  place 
of  abode. '^*  This  is  a  rule  which  can  be  acted  upon  in  the  majority 
of  instances,  because  a  presentment  can  be  made  at  one  of  these 
places.  But  the  rule  is  not  without  exception.  Under  various  cir- 
cumstances, a  demand  in  any  form  may  be  dispensed  with.  The 
test  is  whether  due  diligence  to  make  a  demand  has  been  made,  and 
if  a  demand  is  found  to  be  impracticable,  proper  efforts  for  that 
purpose  having  been  made,  the  indorser  will  stiU  be  liable,  notice  hav- 
ing been  given  him  by  the  holder.  Instances  of  this  exception 
f/rfc  when  the  acceptor  or  maker  has  absconded,'' °  or  is  a  seaman  on 
a  Tojage,**  0¥  has  no  known  place  of  residence  or  of  business,'* 

7  8  TAYLOR  V.  SNfDEK,  3  Denio,  145;  Holtz  v.  Boppe,  37  N.  Y.  G34;  GATES 
V.  BEECHER,  60  N.  Y.  518;  Meyer  v.  Hibsher,  47  N.  Y.  265;  COX  v.  BANK, 
100  U.  S.  713,  MITCHELL  v.  BARING,  10  Barn.  &  C.  11;  BARNES  v. 
VAUGBLAN,  6  R.  I.  259;  Farmers'  Bank  v.  Duvall,  7  Gill  &  J.  (Md.)  78;  Moore 
V.  Waitt,  13  N.  H.  415;  SUSSEX  BANK  v.  BALDWIN,  17  N.  J.  Law,  487; 
Draper  v.  Clemens,  4  Mo.  52.  In  the  case  of  BARNES  v.  VAUGHAN,  6  R.  I. 
259,  it  was  held  by  Bosworth,  J.,  that,  "if  no  place  of  payment  is  named  in  the 
note,  at  which  the  note  is  payable,  it  is  necessary  to  present  the  note  to  the 
maker  personally,  or  at  his  place  of  abode  or  business,  before  the  indorser  can 
be  made  chargeable."  See,  also,  CHEEK  v.  ROPER,  5  Esp.  105;  PARKER  v. 
KELLOGG,  158  Mass.  90,  32  N.  E.  1038. 

7  0  PUTNAM  V.  SULLIVAN,  4  Mass.  45-53;  Lehman  v.  Jones,  1  Watts  &  S. 
<Pa.)  126;   Ratcliff  v.  Planters'  Bank,  2  Sneed,  425. 

80  Barrett  v.  Wills,  4  Leigh,  114.  In  DENNIE  v.  WALKER,  7  N.  H.  199.  it 
was  held  by  Upham,  J.,  that  "a  removal  beyond  the  bounds  of  the  govern- 
ment, after  the  making  of  a  note,  and  before  it  comes  due,  and  where  no  place 
of  payment  of  the  note  is  specified,  renders  a  demand  upon  the  maker  unneces- 
sary; but  this  Is  an  exception  to  the  general  rule,  and  must  be  construed 
strictly." 

«i  Whiftler  v.  Graffam,  3  Greenl.  82;  Duncan  v.  McCuIlough.  4  Serg.  &  R. 
480.    "If  the  maker  has  no  known  residence  or  place,  the  holder  will  be  ex- 


358  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  (Cll.    9^ 

er  after  the  giving  of  the  note  or  bill,  and  before  its  maturity,  the 
maker  or  acceptor  has  removed  from  the  state  or  country.^^  In  all 
of  those  instances  a  presentment  and  demand  are  excused.  The 
reason  of  the  rule  is  due  diligence,  and,  where  no  place  of  payment 
is  stipulated  in  the  note,  due  diligence  means  what  is  consistent 
with  ordinary  business  practice.  Experience  warrants  the  position 
that  ordinary  business  practice  and  due  diligence  are  the  same. 
Where  no  place  of  presentment  or  payment  is  specified,  due  diligence 
would  require  that  the  instrument  be  presented  where  there  might 
be  supposed  to  be  some  one  to  care  for  it.^' 

The  foregoing  general  statements  as  to  the  place  of  presentment 
are  to  be  qualified  by  the  other  statement  that  their  main  impor- 
tance is  in  their  application  to  the  enforcement  of  the  contract  of 
the  drawer  or  indorser.  A  failure  to  present  does  not  relieve  the  ac- 
ceptor or  maker  from  the  principal  debt,  but  does  discharge  the 
drawer  and  indorsers.*     His  liability  as  a  surety  is  strictissimi  juris, 

eused  from  making  any  demand  whatever.  So,  If  in  the  Intermediate  period 
between  the  time  when  the  note  was  made  and  when  it  becomes  due  the  maimer 
has  removed  his  domicile  or  place  of  business  to  another  state.  •  •  •  It 
will  in  such  case  be  sufficient  to  present  the  note  at  his  former  residence  or 
place  of  business."  Per  Wright,  J.,  in  ADAMS  v.  LELAND.  30  N.  Y.  309.  To 
the  same  effect,  see  ERWIN  v.  ADAMS,  2  La.  318;  SANDS  v.  CLARKE,  8  V. 
B.  751. 

8  2  McGRUDER  v.  BANK  OF  WASHINGTON,  9  Wheat.  598;  Gillespie  v. 
Hannahan,  4  McCord,  503;  Reid  v.  Morrison,  2  Watts  &  S.  401;  Wheeler  v. 
Field,  6  Mete.  (Mass.)  290;  Central  Bank  v.  Allen,  16  Me.  41;  Grafton  Bank  v. 
Cox,  13  Gray,  503.  But  if  the  maker  of  a  note,  when  it  is  made  or  indorsed, 
has  a  known  residence  out  of  the  state,  which  remains  imchanged,  demand 
must  be  made  on  him,  or  due  diligence  used.  BANK  OF  ORLEANS  v. 
WHITTEMORE,  12  Gray  (Mass.)  469;  TAYLOR  v.  SNYDER.  3  Denio  (N.  Y.> 
150. 

8  3  Wood  worth  v.  Bank  of  America,  19  Johns.  391;  Meyer  v.  Hibsher,  47  N. 
Y.  265. 

*Neg.  Inst.  L.  §  130,  provides:  "Presentment  for  payment  is  not  necessary  in 
order  to  charge  tlie  person  primarily  liable  on  the  instrument;  but  If  the  in- 
stalment is,  by  its  terms,  payable  at  a  special  place,  and  he  is  able  and  will- 
ing to  pay  it  there  at  maturity,  such  ability  and  willingness  are  equivalent  to 
a  tender  of  payment  upon  his  part.  But,  except  as  herein  otherwise  provided, 
presentment  for  payment  is  necessary  in  order  to  charge  the  drawer  and  in- 
dorsers." This  declares  the  law  as  laid  down  in  this  country.  In  England 
there  was  formerly  great  diversity  of  opinion  as  to  the  necessity  of  present- 


§§  133-140)  PRESENTMENT.  359 

and  must  be  enforced  according  to  the  letter  of  the  contract.  The 
due  diligence  the  holder  owes  to  him  is  only  satisfied  by  presentment 
at  the  place  where  it  is  to  be  presumed  that  funds  have  been  pro- 
vided to  meet  the  bill  or  note  at  maturity.^*  And,  if  no  place  is 
specified,  then  a  reasonable  effort  on  the  part  of  the  holder  to  collect 
the  paper  of  the  maker  or  acceptor  in  ways  which  the  law  itself 
has  prescribed  and  pointed  out.  This  topic  will  be  amplified  in  a 
subsequent  section  of  this  chapter. 

ment  to  charge  the  acceptor  when  a  bill  was  accepted  payable  at  a  particular 
place.  It  was  finally  settled  by  the  house  of  lords  (ROWE  v.  YOUNG,  2  Brod. 
&  B.  165)  that,  where  a  bill  was  so  accepted,  presentment  at  the  place  must 
be  proved.  This  led  to  the  passage  of  Onslow's  Act  (1  &  2  Geo.  IV.,  c.  78), 
which  enacted  that  an  acceptance  payable  at  a  particular  place  should  be 
deemed  a  general  acceptance  unless  payable  there  only.  The  effect  of  the  act 
was  that,  except  in  the  latter  case,  presentment  was  not  necessary  to  charge 
the  acceptor.  SELBY  v.  EDEN,  3  Bing.  611;  Halstead  v.  Skelton,  5  Q.  B. 
E.  86.  The  act  did  not  apply  to  notes,  and,  before  and  after  the  act,  in  case  of 
a  note  payable  at  a  particular  place,  presentment  has  been  necessary  to  charge 
the  maker.  SANDERSON  v.  BOWES,  14  East.  500;  2  Ames,  Gas.  Bills  &  N.  93, 
note  1.  In  the  United  States  the  courts  have  almost  universally  held  that 
presentment  of  a  bill  or  note,  although  payable  at  a  particular  place,  is  not  nec- 
essary to  charge  the  acceptor  or  maker;  the  only  consequence  of  failure  to 
present  being  that  the  acceptor  or  maker,  if  he  was  ready  at  the  time  and 
place,  may  plead  the  fact  in  bar  of  damages  and  costs.  WALLACE  v.  McCON- 
NELL,  13  Pet.  136;  Cox  v.  Bank,  100  U.  S.  704;  CARTER  v.  SMITH,  9  Cusb. 
(Mass.)  321;  Hills  v.  Place,  48  N.  Y".  520;  Lazier  v.  Horan,  55  Iowa,  77,  7  N. 
W.  457;  Montgomery  v.  Tutt,  11  Cal.  307;  MONTGOMERY  v.  ELLIOTT,  B 
Ala.  701;   Peabody  Ins.  Co.  v.  Wilson,  29  W.  Va.  543,  2  S.  E.  888. 

84  Bank  of  U.  S.  v.  Smith,  11  Wheat.  171;  Watkins  v.  Crouch,  5  Leigh,  522; 
Ferner  v.  Williams,  37  Barb.  9;  Parker  v.  Stroud,  98  N.  Y,  379;  Brown  v. 
Jones,  113  Ind.  46,  13  N.  E.  857.  Where  a  bill  is  drawn  payable  at  a  particular 
place,  and  the  drawee  accepts  it  payable  at  that  place,  in  an  action  against 
the  drawer,  presentment  to  the  acceptor  at  that  place  must  be  proved.  GIBB 
V.  MATHER,  8  Bing.  214.  An  acceptance  which  makes  a  bill  payable  at  a 
different  place  from  that  in  which  the  drawee  has  his  residence  is  a  material 
departure  from  the  tenor  of  the  instrument,  and  presentment  for  payment  at 
the  place  in  which  it  Is  made  payable  by  the  acceptance,  will  not  charge  the 
drawer.    NIAGARA  BANK  v.  MANUFACTURING  CO.,  31  Barb.  (N.  Y.)  403. 


>60  PRESENTMENT    AND    NOTICE    OF    DI3U0N0K.  (Ch.   9 


SAME— BY  WHOM  AND  TO  WHOM  MADE— EFFECT  OF  FAIL- 
URE TO  PRESENT— NOTICE  OF  DISHONOR— PROTEST. 

141.  Presentment  must  be  made  by  the  lawful  holder, 
or  his  authorized  agent,  to  the  drawee,  acceptor,  or  maker, 
or  his  authorized  agent. 

142.  A  failure  to  make  due  presentment  for  acceptance, 
when  it  is  incumbent  on  the  holder  to  make  the  same,  de- 
prives him  of  his  remedy  both  on  the  bill  itself  and  on 
the  consideration  for  which  it  was  given. 

143.  A  failure  to  present  a  bill  or  note  for  payment  at 
the  proper  place  or  time — 

(a)  Relieves  the  acceptor  or  maker  from  payment  of 

further  interest  and  costs  of  suit,  if  he  was  ready 
with  funds  to  meet  the  bill  or  note  at  the  stipu- 
lated time  and  place  of  payment,  but  not  from 
the  principal  sum  of  the  bill  or  note. 

(b)  It   discharges   the   drawer  and  indorsers  from  lia- 

bility. 

144.  Upon  presentment  of  a  bill  for  acceptance,  or  of  a 
bill  or  note  for  payment,  and  a  refusal  to  accept  the  bill 
or  to  pay  the  bill  or  note,  notice  of  its  dishonor  must  be 
given  to  the  drawer  of  the  bill,  and  to  the  indorsers  of 
the  bill  or  note.  It  is  usual  to  protest  it,  though  this  is 
necessary  only  with  foreign  bills. 

In  concluding  the  subject  of  "Presentment,"  and  before  taking 
up  the  subject  of  "Dishonor,"  it  remains  to  mention  the  person  to 
whom  and  by  whom  a  bill  may  be  presented  for  acceptance,  or  a 
bill  or  note  may  be  presented  for  payment,  the  effect  of  the  failure 
of  the  holder  to  present  the  instrument  for  acceptance  and  for 
payment,  and  the  proceeding  proper  to  be  followed  in  case  accept- 
ance or  payment  is  refused. 


§§  141-144)  PRESENTMENT.  361 

By  TITiom. 

Presentment  should  be  made  by  the  lawful  holder  or  by  his  duly- 
authorized  agent.*°  The  meaning  of  "a  lawful  holder''  is  deter- 
mined by  principles  already  given.*'  Where  the  instrument  is  pay- 
able to  bearer  or  indorsed  in  blank,  both  in  case  of  presentment 
for  acceptance  and  of  presentment  for  payment,  the  rule  is  that 
the  drawee  in  case  of  acceptance,  and  the  acceptor  or  maimer  in 
case  of  payment,  is  bound  to  consider  the  person  in  possession  of 
the  bill  or  note,  with  the  ostensible  legal  title  to  it,  as  the  person 
lawfully  entitled  to  make  the  presentment  and  demand.  This  os- 
tensible legal  title  is  shown  by  the  possession  of  the  instrument. 
Where  the  instrument  is  indorsed  in  full,  for  reasons  already  given,  it 
must  be  presented  by  the  indorsee.  Where,  however,  the  instrument 
is  unindorsed  by  the  payee  or  indorsed  in  full,  and  not  in  the  posses- 
sion oi  the  indorsee,  then  the  person  to  whom  it  is  presented  is  put 
upon  his  inquiry.  If,  without  inquiry,  he  accepts  and  pays,  it  is 
at  the  risk  of  repayment,  if  he  does  not  pay  the  true  owner.  The 
possessor  certainly  cannot  be  deemed,  as  is  sometimes  said,*^  to  be 
the  agent  of  the  true  owner  by  virtue  of  his  possession.**  Though 
this  lasc  position  is  modified  by  the  rule  that  if  it  appears  conclu- 
sively that  the  omission  to  indorse  was  through  inadvertence,  and 
that,  although  not  indorsed,  the  instrument  wa^  transferred  to  the 
holder  before  maturity,  for  a  valuable  consideration,  then  such  an 
instrument  is  in  the  possession  of  some  party  from  whom  it  is 
proper  to  accept  it,  or  to  whom  it  is  proper  to  pay  it.*' 

The  agent  making  the  presentation  is  generally,  but  not  neces- 
sarily, a  notary  public.  A  notary  public  is  chosen  to  make  pre- 
sentment for  purpose  of  protest.  The  distinction  between  pre- 
sentment and  protest  is  that  presentment  is  the  placing  the  bill 
so  that  those  liable  upon  it  can  have  it  at  hand  to  accept  it  or 
to  pay  it  when  due,  but  protest  is  an  official  act,  held  necessary 

8  6  BANK  OF  UTICA  v.  SMITH,  18  Johns.  (N.  Y.)  230;  FREEMAN  v.  BOYN- 
TON,  7  Mass.  483;  AGNEW  v.  BANK.  2  Har.  &  G.  478;  LEli^TLEY  v.  MILLS. 
4  Term  U.  170;  Bachellor  v.  Priest,  12  Pick.  (Mass.)  399;  SUSSEX  BANK  v. 
BALDWIN.  17  N.  J.  Law,  487.     See  Neg.  Inst  L.  §§  132,  242. 

8  0  See  supra,  p.  191  et  seq. 

»T  Daniel,  Neg.  Inst.  §  573. 

88  Doubleday  v.  Kress,  .50  N.  Y.  41.3. 

•  •  Franklin  Bank  v.  Kayuioud,  3  Wend.  69. 


362  PRESENTMENT   AND    NOTICE    OF    DISHONOR.  (Cll.    9 

in  case  of  foreig:n  bills  to  charge  the  indorsers.*  Any  person  who 
is  the  lawful  holder  of  the  instrument  may  make  a  presentment. 
And  while  it  is  also  true  that  any  reputable  citizen,  in  the  absence 
of  a  notary  ])ublic  in  the  town  or  place,  may  make  a  protest,  never- 
theless the  custom  is  practically  limited  to  notaries  public,  because 
it  is  only  the  certificates  or  manifests  of  notaries  public  which  by 
the  statutes  of  the  several  states  have  been  declared  to  be  prima 
facie  evidence  of  the  facts  contained  in  them.®°  But,  aside  from  the 
fact  of  protest,  any  person  duly  authorized  may  make  a  present- 
ment,'^ although  it  is  doubtful,  in  case  of  payment  of  an  instru- 
ment specially  indorsed,  whether  or  not  the  malcer  or  acceptor  may 
require  a  written  authority  or  an  indorsement  to  the  agent  before 
being  compelled  to  make  payment."* 
To  Whom. 

Subject  to  the  provisions  stated  in  the  last  sections  of  this  chapter,^ 
a  presentment  must  be  made  to  the  drawee  or  acceptor  of  a  bill, 
or  to  the  maker  of  a  note,  or  to  an  authorized  agent,®'  In  case  of 
acceptance,  the  presentment  must  be  made  to  the  drawee  in  per- 

♦While  any  person  may  present  a  foreign  bill,  and  payment  to  him  is  a  dis- 
charge, the  drawer  and  indorsers  cannot  be  charged  in  case  of  non-payment 
without  protest,  which  must  be  made  by  a  notary  public,  and  cannot  be  based 
upon  the  act  of  another.  OCEAN  NAT.  BANK  v.  WILLIAMS,  102  ZMass.  141. 
Whether  presentment  by  the  notary's  cleric  is  sufficient  fovmdation  for  protest 
has  been  debated.  The  better  rule  appears  to  be  that  it  is  not.  OCEAN  NAT. 
BANK  v.  WILLIAMS,  supra.  But  it  has  been  held  sufficient  if  warranted  by 
usage.    Daniel,  Neg.  Inst.  §§  579-587. 

90  In  the  case  of  LANOENBERGER  v.  KROEGER,  48  Cal.  149,  it  was  held 
that,  where  it  was  not  specified  in  the  instrument  in  what  kind  of  money  the 
draft  was  payable,  a  demand  for  payment  in  gold  would  not  charge  the  drawer. 

01  MERCHANTS'  BANK  v.  SPICER,  6  Wend.  (N.  Y.)  443;  Baer  v.  Leppert, 
12  Hun  (N.  Y.)  516;  Hartford  Bank  v.  Barry,  17  Mass.  94;  SHED  v.  BRETT, 
1  Pick.  (Mass.)  401,  413;  Seaver  v.  Lincoln,  21  Pick.  267;  Hartford  Bank  v. 
Stedman,  3  Conn.  489.  * 

92  See  Tied.  Com.  Paper,  §  311,  and  cases  cited.  Contra,  Daniel,  Neg.  Inst.  § 
572,  and  cases  cited. 

93  In  the  case  of  BROWN  v.  TURNER,  15  Ala.  832,  it  was  held  that,  where 
a  bill  was  accepted  by  two  partners,  demand  of  payment  made  of  the  agent  of 
one  of  them,  in  the  absence  from  the  city  of  both  partners,  was  sufficient  to- 
charge  the  drawer. 


§§   141-144)  PRESENTMENT.  36S 

son,  if  he  be  alive  and  can  be  found.®*  If  he  cannot  be  found, 
then  inquiry  should  be  made  for  some  person  authorized  to  accept 
for  him,  though  it  should  be  always  kept  in  mind  that  it  is  in- 
cumbent on  the  plaintiff  to  prove  that  the  agent  was  authorized 
to  accept  or  refuse  acceptance."  If  the  drawee  is  dead,  the  better 
opinion  is  that  at  once  there  may  be  a  protest  for  non-acceptance.®® 
In  case  of  presentment  for  payment,  if  there  is  a  stipulation  for 
the  paj-ment  of  the  instrument  at  any  particular  place,  present- 
ment should  be  made  to  the  drawee,  acceptor  or  maker,  if  he  is 
to  be  found  at  the  place  of  payment ;  if  not,  then  presentment  should 
be  made  to  any  person  of  discretion  who  can  be  found.  It  is  the 
duty  of  the  acceptor  or  maker  to  have  funds  at  that  place,  and  a 
person  on  the  premises  who  may  be  reasonably  supposed  to  know 
of  them  or  to  have  charge  of  them  is  a  proper  person  to  whom  to 
make  a  presentment.®'^  If  no  place  is  stipulated,  then  presentment 
must  be  made  either  to  the  acceptor  or  maker  personally,  or  at  his 
place  of  business  or  of  residence,  for  reasons  already  given.®*     And 

8  4  CHEEK  v.  ROPER,  5  Esp.  175.  In  this  case  it  was  held  that,  in  order  to 
charge  the  drawer  of  an  unaccepted  bill,  some  actual  evidence  of  a  demand  to 
accept  on  the  drawee  must  be  proved.  It  is  not  sufficient  to  call  at  the  resi- 
dence of  the  drawee,  and  for  an  acceptance  to  be  refused  by  a  person  who  wa* 
imknown  by  the  one  making  the  demand.    SHARPE  v.  DREW,  9  Ind.  281. 

9  5  Nelson  v.  Fotterall,  7  Leigh  (Va.)  180;  STAIXBACK  v.  BANK,  11  Grat. 
(Va.)  2G0.  It  seems  that  a  bill  addressed  to  several  persons  should  be  pre- 
sented to  all  unless  one  be  authorized  to  accept  for  all.  If  addressed  to  a 
partnership,  acceptance  by  one  partner  would  be  sufficient,  but  not  after  disso- 
lution and  notice  thereof.  TOMBECKBEE  BANK  v.  DUMELL,  5  Mason,  56, 
Fed.  Cas.  No.  14,081.    See  Neg.  Inst.  L.  §  242,  subd.  1. 

8  6  Tied.  Com.  Paper,  §  212;  Daniel,  Neg.  Inst.  §  459.  Neg.  Inst.  L.  §  242, 
subd.  2,  provides  that  "presentment  may  be  made  to  his  personal  representa- 
tive." Referring  to  the  similar  enactment  of  the  Bills  of  Exchange  Act,  Judge 
Chalmers  says:  "Before  this  enactment  the  law  on  this  point  was  very  doubt- 
ful. SMITH  V.  BANK,  8  Moore,  P.  C.  (N.  S.)  at  pages  461,  462.  Now  the  holder 
has  an  option."  Chalm.  Bills  Exch.  (4th  Ed.)  137.  Cf.  Neg.  Inst.  L.  §  215, 
subd.  1. 

8  7  Matthews  v.  Haydon,  2  Esp.  509;  Sanford  v.  Norton,  17  Vt.  28.5;  Draper 
V.  Clemens,  4  Mo,  52;  Phillips  v.  Poindexter,  18  Ala.  579;  BANK  OF  ENG- 
LAND V.  NEWIMAN,  12  Mod.  241.  In  this  ca.se  It  was  held  that  a  demand  of 
a  servant  of  the  drawer,  who  used  to  pay  money  for  him,  was  a  good  demand. 
Whaley  v.  Houston,  12  La.  Ann.  r)85. 

»»  See  supra,  p.  353  et  beq.     In  the  case  of  BARNES  v.  VaUGHAN,  U  R.  1. 


364  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  (Ch.   9 

in  making  presentment  in  these  ways  the  principles  enunciated  also 
apply.  If  the  maker  or  acceptor  is  dead,  presentment  should  be 
made  to  his  personal  representative,  if  one  can  be  found.®*  But  if 
none  has  been  appointed,  then  at  the  acceptor's  or  maker's  former 
place  of  residence.^""  Where  the  persons  primarily  liable  on  the 
instrument  are  liable  as  partners,  and  no  place  of  payment  is  spec- 
ified, presentment  for  payment  may  be  made  to  any  one  of  them, 
even  though  there  has  been  a  dissolution  of  the  firm.*  Where  there 
are  several  persons,  not  partners,  primarily  liable  on  the  instrument, 
and  no  place  of  payment  is  specified,  presentment  must  be  made  to 
them  all.f 

Effect  of  Failure  to  Present. 

A  failure  to  present  for  acceptance  is,  in  general,  unimportant.^"^ 
But  in  case  of  bills  payable  at  or  after  sight,  transferred  as  col- 

259.  no  place  was  named  in  the  note  In  question,  and  it  was  held  that  payment 
must  be  demanded  from  the  maker  in  person,  or  at  his  place  of  business  or 
residence,   on  tlie  last  day  of  grace. 

»»  MAG  RUDER  v.  BANK,  3  Pet.  87.  The  decision  in  this  case  was  to  the 
effect  that  the  fact  that  tlie  indorser  of  a  note  tooli  out  letters  of  administration 
on  the  etsate  of  the  maker,  who  died  before  it  became  due,  did  not  free  tlie 
holder  from  the  duty  of  demanding  payment,  and  of  giving  notice  to  the  Indorser. 
Gower  v.  Moore,  25  Me.  16;  Juniata  Bank  v.  Hale,  16  Serg.  &  R,  167.  In  this 
case  the  maker  of  the  note  was  shown  to  have  died  before  it  became  due.  Let- 
ters of  administration  upon  the  estate  were  taken  out  bv  the  indorsers,  among 
others,  before  maturity  of  the  note.  It  was  held  that,  notwithstanding  these 
facts,  notice  of  the  maker's  non-payment  must  be  given  to  the  indorsers. 
GROTH  V.  GYGER,  31  Pa.  St.  271. 

100  MAGRUDER  v.  BANK,  3  Pet.  87;  Juniata  Bank  v.  Hale,  16  Serg.  &  R. 
167;  Price  v.  Young.  1  Nott  &  McC.  438;  Gower  v.  Moore,  25  Me.  16.  See  Neg. 
Inst.  L.  §  136.    Cf.  section  142. 

•  nils  is  the  language  of  Neg.  Inst.  L.  §  137,  which  is  declaratory.  BROWN 
V.  TURNER,  15  Ala.  832;  CAYUGA  COUNTY  BANK  v.  HUNT,  2  Hill  (N.  Y.) 
635;  GATES  v.  BEECHER,  60  N.  Y.  518;  Crowley  v.  Barry,  4  Gill  (Md.)  194; 
FOURTH  NAT.  BANK  v.  HEUSCHEN,  52  Mo.  207. 

t  This  is  the  language  of  Neg.  Inst.  L.  §  138.  Cf.  section  142.  ARNOLD  v. 
DRESSER,  8  Allen  (Mass.)  435;  Willis  v.  Green,  5  Hill  (N.  Y.)  232;  BLAKB 
V.  McMILLEN,  33  Iowa,  150;  BENEDICT  v.  SCHMIEG,  13  Wash.  476,  43 
Pac.  374. 

101  See  supra,  p.  337  et  seq. 


^§   141-144)  PRESENTME.NT.  3G5 

lateral  security,^"^  or  in  payment  of  the  holder's  debt/"'  present- 
ment for  acceptance  is  vital.  For,  as  has  been  seen/°*  it  is  the 
duty  of  the  holder  of  such  bills  to  present  them  for  accept- 
ance within  a  reasonable  time,  else  the  drawer  and  prior  indorsers 
are  discharged.^*"*  This  duty  binds  the  transferee,  and  he  must  in 
turn  present  the  paper  for  acceptance  within  a  reasonable  time. 
Hence  the  rules  already  given  ^°^  do  not  apply  to  such  a  transferee, 
and  he  is  not  allowed  to  treat  the  instrument  as  a  suspension  of  the 
indebtedness,  and  to  sue  upon  the  original  consideration,  upon  re- 
turning to  the  debtor  the  bill,  from  which  the  drawer  and  indorser 
are  discharged  by  reason  of  his  own  negligence.  He  has  made  the 
paper  his  own  so  as  to  substitute  the  parties  to  it  his  debtors  in 
place  of  his  original  debtor,  and  he  has  discharged  the  original  debt- 
or from  all  liability,  whether  the  paper  is  in  fact  paid  or  not.^"'' 
The  loss  must  fall  upon  his  shoulders,  and  not  that  of  the  debtor, 
for  a  bill  rendered  nugatory  in  many  of  its  important  particulars  is 
treated  as  a  discharge  or  payment  of  the  original  debt.  This  rule 
applies  also  in  case  of  the  laches  of  the  original  creditor  in  pre- 
senting for  payment  a  bill  or  note  transferred  to  him  by  his  debtor, 
or  in  obtaining  the  payment  of  instruments  so  transferred  in  ways 
from  which  loss  or  injury  ensues.^"* 

102  PEACOCK  v.  PUESELL,  14  C.  B.  (N.  S.)  728;  Dayton  v.  Trull,  23  Wend. 
345. 

los  In  the  case  of  Smith  v.  Miller,  43  N.  Y.  174,  it  was  held  by  Allen,  J.,  that 
"a  creditor  may  so  deal  with  negotiable  securities  received  from  his  debtor 
for  collection,  and  to  be  placed  to  his  credit  when  paid,  as  to  discharge  the 
debtor  from  all  liability,  *  ♦  •  Laches  which  would  discharge  the  drawer 
or  indorser  of  a  bill  of  exchange  will  as  effectually  extinguish  the  debt  for 
payment  of  which  a  bill  or  other  negotiable  instrument  Is  transferred." 

If*  See  supra,  p.  o3T  et  seq. 

105  Mellish  v.  Rawdon,  9  Bing.  416;  Ramchurn  v.  Radakissen,  9  Moore,  P. 
C.  4G;  WALLACE  v.  AGRY,  4  Mason.  336,  Fed.  Cas.  No.  17,096;  Strong  v. 
King,  35  111.  9;  GOUPY  v.  HARDEN,  7  Taunt.  103.  In  GOUPY  v.  HARDEN 
it  was  held  by  Gibbs,  C.  J.,  that  there  was  no  laches  In  putting  a  foreign  bill 
payable  after  sight  into  circulation  before  acceptance,  and  to  keep  it  circulating 
60  long  as  the  convenience  of  the  successive  holders  requires. 

108  See  supra,  p.  oLtT  et  seq. 

107  People  v.  Cromwell,  102  N.  Y.  477,  7  N.  E.  413;  Smith  v.  Miller,  43  N. 
Y.  171 ;   Southwick  v.  Sax,  9  Wend.  122. 

108  Jones  V.  Savage,  6  Wend.  058;   Tobey  v.  Barber,  5  Johns.  08;    Chamber- 


366  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  (Cll.   9 

The  principal  point  of  importance  to  be  noted  in  tlie  case  of  the 
failure  of  the  holder  to  present  a  bill  or  note  for  payment  at  the 
proper  place  or  time  is  the  difference  in  its  effect  upon  the  con- 
tract of  the  acceptor  and  maker,  and  that  of  the  drawer  and  iu- 
dorsers.  As  far  as  the  maker  and  acceptor  are  concerned,  the 
place  and  time  of  payment  embodied  in  an  instrument  are  looked 
upon  merely  as  memoranda  of  the  place  where  and  time  when  pay- 
ment is  to  be  demanded,  and  not  as  part  of  the  contract  other- 
wise essential.  The  maker  or  acceptor  is  liable  everywhere  and 
at  all  times  within  the  statute  of  limitations,  and,  as  against  him, 
the  bringing  of  the  action  is  a  suflQcient  demand.^"'  The  right  of 
action  always  subsists  so  long  as  the  instrument  is  unpaid.  The 
place  and  time  of  payment,  however,  are  so  far  important  that,  if 
the  maker  or  acceptor  were  there  then,  wath  his  money  to  pay 
the  instrument,  it  is  looked  upon  much  as  a  tender  would  be  in 
the  case  of  an  ordinary  debt.  The  holder  may  recover  from  him 
at  any  time  the  amount  of  the  instrument,*^"  but  not  interest,  by 

lyn  V.  Delarive,  2  Wils.  353;  Hebden  v.  Hartsink,  4  Esp.  46;  Capidge  v. 
Allenby,  6  Barn.  &  C.  373;  Adams  v.  Darby,  28  Mo.  162;  Grade  v.  Sandford, 
9  Ark.  238.  In  KEARSLAKB  v.  MORGAN,  5  Tenn  R.  513,  it  was  held  that  a 
plea  in  assumpsit  that  the  defendant  (who  was  the  payee  of  a  promissory  note) 
indorsed  it  to  the  plaintiff  "for  and  on  account  of"  the  said  debt  was  good. 

108  Rhodes  v.  Gent,  5  Bam.  &  Aid.  244;  Jackson  v.  Packer,  13  Conn.  842; 
Armstrong  v.  Caldwell,  2  111.  546;  Chillicothe  Branch  of  State  Bank  v.  Fox, 
3  Blatchf.  431,  Fed.  Cas.  No.  2,683;  Blair  v.  Bank  of  Tennessee,  11  Humph. 
83;  WEGBRSLOFFE  v.  KEENE,  1  Strange,  222;  Rice  v.  Hogan,  8  Dana  (Ky.) 
134. 

110  Bacon  v.  Dyer,  12  Me.  19;  Armistead  v.  Armistead,  10  Leigh,  525;  Mtil- 
herrin  v.  Hannum,  2  Yerg.  81;  BQlls  v.  Place,  48  N.  Y.  520;  Lazier  v.  Horan, 
55  Iowa,  75.  7  N.  W.  457.  Though  the  paper  be  payable  on  demand,  action 
may  be  brought  without  presentment.  NORTON  v.  ELLAM,  6  Law  J.  Exch. 
121;  WHEELER  v.  WARNER,  47  N.  Y.  519;  HARRISBURG  TRUST  CO.  v. 
SHUFELDT  (C.  C.)  78  Fed.  292.  In  WHEELER  v.  WARNER,  supra.  Peck- 
ham,  J.,  said:  "Upon  such  a  note,  with  or  without  interest,  an  action  may 
be  maintained  against  the  maker  without  any  demand,  because  it  is  due. 
•  •  *  To  say  that  the  suit  is  the  demand  is  to  repeat  an  unmeaning  phrase 
as  thus  used,  which  no  number  of  repetitions  can  make  sensible."  The  rule 
as  to  necessity  of  demand  is  otherwise  in  the  case  of  certificates  of  deposit, 
though  the  decisions  are  not  unanimous.  Daniel,  Neg.  Inst.  §§  1707,  1707a. 
Similar  conflict  exists  in  the  case  of  bank  notes.     Daniel,  Neg.  Inst  §  1685. 


§§141-144)  PRESENTMENT.  367 

way  of  damages,  for  his  failure  to  pay.^^^     In  other  words,  the 
non-attendance  of  the  holder  with  the  instrument  at  the  time  and 
place  of  payment  can  produce  no  worse  consequences  to  him  than 
if  he  had  attended,  and  the  acceptor  or  maker  had  also  been  pres- 
ent, and  tendered  the  money,   which  the  holder   had   refused  to 
accept.^^'     Of  course,  with  this  must  be  coupled  the  other  principle 
governing  the  law  of  tender, — that,  for  the  maker  or  acceptor  to 
preserve  his  rights,  the  tender  must  be  kept  good.    The  funds  must 
be  kept  at  the  place  of  payment  to  pay  the  instrument  at  any  time; 
for  if  the  holder  make  a  special  demand  afterwards,  and  the  in- 
strument be  not  paid,  then  his  rights  revive,  and  he  becomes  en- 
titled to  interest  or  damages  from  the  time  of  the  demand  and 
also  his  costs  of  suit.    This  general  rule  does  not  apply  to  the 
drawer^^'  or  indorser.^^*     He  is  not  the  principal  debtor,  but  only 
a  surety,  whose  liability  is  dependent  upon  the  strict  performance 
of  the  contract  by  the  holder."*     The  place  and  time  of  paym_ent 
for  him  are  an  essential  part  of  the  contract.     The  indorser  is  en- 
titled to  be  at  once  apprised  of  the  default  of  the  maker,  so  that 
he  may  protect  himself,  both  from  the  payment  of  interest  as  dam- 
ages and  of  costs,  by  taking  up  the  bill  or  note  himself,  and  further 
may  take  steps  to  protect  himself  as  against  prior  indorsers.     The 
holder  of  the  bill  or  note  is  held  to  a  most  strict  compliance  with 
its  terms.     Presentment  either  the  day  before  or  the   day  after 
the  instrument  became  due  will  not  avail.     The  loss  or  want  of  one 
day  is  *"  a  palpable  want  of  due  diligence,  which  discharges  the 
indorser. 

Notice  of  Dishonor, 

After  presentment  for  acceptance  or  payment  has  been  made  and 

refused,  notice  of  dishonor  must  at  once  be  given  to  the  drawer  and 

111  Phillips  V.  Franlilin,  Gow,  196;  Murray  v.  East  India  Co.,  5  Barn.  & 
Aid.  204. 

112  Hills  V.  Place,  48  N.  T.  520;   ante,  p.  358. 

ii»  Munroe  v.  Easton,  2  Johns.  Cas.  75;   Bunitt  v.  Tidmarsh,  5  111.  App.  341. 

114  Mafrruder  v.  Bank,  3  Pet.  87;  Ruddell  v.  Walker,  7  Ark.  457; 
Vanwickle  v.  Downing,  19  La.  Ann.  83;  Duncan  v.  McCiilloiiph.  4  Sorg.  &  R. 
48(j;  Brandt  v.  Mickle,  28  Md.  430;  Bank  of  Alexandria  v.  Young,  2  Cranch, 
C.  C.  52,  Fed.  Cas.  No.  858. 

iiBWolcott  V,  Van  Santvoord,  17  Johns.  247;  Parker  r.  Stroud,  98  N.  Y. 
879.     See  Nog.  Inst.  L.  g§  l.'W,  144. 

lie  JOIIN.SON  V.  IIAKJIIT,  13  Johns.  (N.  Y.)  470. 


368  PRESENTMENT    AND    NOTICE    OF    DISHONOB.  (Cll.    9' 

indorsers;  otherwise  they  are  discharged.*  The  reason  of  the  rule 
that  a  failure  to  give  the  drawer  and  indorsers  notice  of  non-accept- 
ances discharges  them  is  that  these  parties  may  take  prompt  meas- 
ures of  self-protection;  the  drawer  by  withdrawing  or  withholding 
the  further  accumulation  of  effects  in  the  hands  of  the  drawee,  and 
the  indorsers  by  obtaining  payment  from  the  parties  respectively 
liable  to  them.^^^  The  reason  for  the  rule  that  failure  to  give  a 
drawer  and  indorsers  notice  of  non-payment  discharges  them  i» 
partly  that  given  in  the  last  paragraph,  and  partly  because  the  con- 
tract of  the  drawer  or  indorser,  as  construed  by  the  law  merchant, 
depends  upon  two  conditions,  which  are  conditions  precedent  to  the 
right  of  enforcement  of  the  bill  or  note  against  the  drawer  or  in- 
dorser. These  are  presentment  to  the  drawee,  acceptor,  or  maker, 
and  a  refusal  on  his  part  to  pay,  and  secondly  due  notice  to  the 
drawer  or  indorser.***  If,  therefore,  the  holder  fails  to  give  the 
drawer  or  indorser  due  notice  of  non-payment,  he  fails  to  perform  a 
condition  precedent  to  his  right  of  recovery  upon  the  bill,  and  can- 
not enforce  its  payment  against  the  parties  who  had  a  right  to  its 
performance.  And  this  discharge  acquits  the  drawer  and  indorser 
both  of  his  liability  upon  the  bill  or  note,  and  of  his  liability  upon 
the  consideration  for  its  transfer.  For,  as  was  shown  in  case  of 
failure  to  present  for  acceptance,  the  holder,  by  his  neglect,  has 
made  the  bill  or  note  his  own,  and  loss  because  of  this  neglect  will 
fall  upon  him.^^" 
Protest. 

A  usual  preliminary  to  giving  notice  of  dishonor  of  bill  or  note  is 
its  protest.     A  protest  is  defined  as  in  form  a  solemn  declaration 

•  See  Neg.  Inst  L.  §  160. 

117  Edw.  Neg.  Inst.  §  G19;   Stewart  r.  Millard,  7  Lans.  373. 

118  MUSSON  V.  LAKE,  4  How.  (U.  S.)  262;  ROTHSCHILD  v.  CURRIE,  1 
Q.  B.  43. 

lis  Jones  V.  Savage,  6  Wend.  659;  Woodcock  v.  Bennet,  1  Cow.  711; 
BRIDGES  V.  BERRY,  3  Taunt.  130.  In  this  case  the  defendant  was  unable 
to  pay  a  bill  when  due,  which  he  had  accepted.  He  obtained  time,  and  in- 
dorsed to  the  plaintiff,  as  a  security,  a  bill  drawn  by  himself  to  his  own  order, 
which,  when  due,  was  dishonored  by  the  drawee,  but  the  holder  omitted  to 
give  the  defendant  notice.  It  was  held  that  by  this  laches  the  defendant  was 
discharged,  not  only  as  indorser  of  the  one  bill,  but  also  as  acceptor  of  the 
other.     In  PEACOCK  v.  PURSELL,  14  Q,  B.  (N.  S.)  728,  it  was  held  that 


§§   141-144)  PRESENTMENT.  369 

written  by  a  notary  nnder  a  fair  copy  of  the  bill  or  note,  stating 
that  acceptance  or  payment  has  been  demanded  and  refused;  the 
reasons  for  such  refusal,  if  any,  are  assigned;  and  that  the  bill  or 
note  is  therefore  protested.^"  Its  popular  signification  includes 
all  the  steps  taken  to  fix  the  liability  of  a  drawer  or  indorsers,^" 
but  its  accurate  technical  meaning  is  that  it  is  the  testimony  of 
some  proper  person,  usually  a  notary,  that  the  regular  legal  steps 
to  fix  that  liability  have  been  taken  by  the  holder.^"  Its  method 
is  for  the  notary  to  himself  properly  present  the  instrument,  and 
demand  its  acceptance  or  payment.  If  these  are  refused,  to  make 
a  minute  thereof  on  the  instrument,  or  in  his  oflQcial  record;  the 
minute  consisting  of  his  initials,  the  year,  month,  and  day  of  dis- 
honor and  discharges.  This  is  done  on  the  day  of  the  dishonor/'^* 
And  on  the  same  day,  or  afterwards,  the  notary  extends  the  protest 
thus  noted  by  embodying  in  a  certificate  the  facts  of  the  protest, 
and  his  acts  in  making  presentment,  demand,  and  in  giving  notice 

wbere  A  received  from  B,  as  collateral  security  for  a  debt,  a  bill  drawn  by  C 
upon  D,  and  at  maturity  failed  to  present  it,  he,  by  his  laches,  made  the  bill 
equivalent  to  payment,  as  between  A  and  B.  Where  one  drew  a  bill  of  ex- 
change on  a  person  to  whom  he  had  shipped  goods  on  his  own  account,  he  is 
entitled  to  notice  of  dishonor,  although  in  fact  the  drawee  had  not  received 
the  goods  when  the  bill  was  presented  for  acceptance.  RUCKER  v.  HILLER, 
16  East,  43;  Brown  v.  Cronise,  21  Cal.  386;  Green  v.  Cummins  (Ky.)  6 
Reporter.  524;  Jennison  v.  Parker,  7  Mich.  355;  Stam  v.  Kerr,  31  Miss.  199; 
GALE  V.  WALSH,  5  Term  R.  239;  PEACOCK  v.  PURSELL,  14  Q.  B.  (N.  S.) 
728;    RUCKER  v.  HILLER,  16  East,  43,  3  Camp.  217. 

120  Byles,  Bills,  p.  263.     See  Neg.  Inst.  L.  §  26L 

121  Townsend  v.  Lorain  Bank,  2  Ohio  St.  345;  Wolford  v.  Andrews,  29 
Minn.  251,  13  N.  W.  167. 

122  Ocoee  Bank  v.  Hughes,  2  Cold.  (Tenn.)  52. 

123  In  the  case  of  CHATERS  v.  BELL,  4  Esp.  48,  Lord  Kenyon  was  of  the 
opinion  that  protest  might  be  made  at  a  future  time,  if  a  bill  were  regularly 
presented  and  noted  at  the  time  of  demand  and  refusal  of  payment.  It  was 
said  by  Grier,  J.,  In  DENNISTOUN  v.  STEWART,  21  Curt.  Dec.  722,  17  How. 
606,  that  "a  protest,  though  necessary,  need  only  be  noted  on  the  day  on  which 
payment  was  refused.  It  may  be  drawn  and  completed  at  any  time  before 
the  commencement  of  the  suit,  or  even  before  the  trial,  and  consoquently  may 
be  amended  according  to  the  truth,  If  any  mistake  has  been  made.  The  vu\)y 
of  the  bill  Is  connected  with  the  bill  certifying  the  formal  demand  l)y  ilie 
public  officer,  as  the  easiest  and  best  mode  of  Identifying  It  with  the  orlgiual." 
See  Neg.  Inst.  L.  §  263.     Cf.  section  267. 

NEQ.BILLS.-24 


370  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  (Ch,   9 

of  dishonor.  To  this  he  generally  appends  his  official  seal.^**  This 
certificate  is  generaJlj  accepted  as  evidence  of  the  facts  set  foilh  in 
its  terms,  and  its  production  obviates  the  necessity  of  proof  of  these 
facts  by  witnesses  in  open  court.  The  main  purpose  of  the  protest, 
therefore,  is  to  furnish  to  the  holder  legal  testimony  of  presentment, 
demand,  and  notice  of  dishonor,  to  be  used  in  actions  against  the 
drawer  and  indorsers.^^"  The  protest  must  be  made  at  the  place 
where  the  bill  is  dishonored.*  The  purpose  of  protest  is  the  reason 
for  the  following  rules: 

(1)  A  foreign  bill  must  be  protested  when  dishonored, ^^'  because, 
from  the  needs  of  the  case,  some  act  of  a  universally  recognized  au- 
thority is  called  for.  By  force  of  custom,  the  official  act  of  the 
notary  public  is  of  recognized  authority  throughout  the  world.  It 
is  deemed  to  afford  satisfactory  evidence  of  dishonor  to  the  drawer 
and  indorsers,  who  from  their  residence  abroad  might  experience  a 
difficulty  in  making  proper  inquiries  on  the  subject,  and  be  com- 
pelled to  rely  on  the  representation  of  the  holder.  By  the  com- 
mon law,  also,  in  case  of  a  foreign  bill,  a  notary's  protest  is  compe- 
tent evidence  of  such  fact,  alike  in  cases  of  protests  for  non-accept- 
ance or  non-payment  and  for  better  security. ^^^ 

(2)  Protest  by  notaries  public  of  a  foreign  note  is  unnecessary, 
unless  it  is  indorsed;  but,  if  indorsed,  its  protest  by  a  notary  pub- 
lic, according  to  the  weight  of  authority,  is  required,  because  the 
indorsement  of  a  note  is  essentially  a  bill  drawn  on  the  maker.^^^ 

12*  Daniel,  Neg.  Inst.  §  927.  The  seal  Is  essential  wtiere  tlie  evidence  is  for 
use  In  other  jurisdictions.  For  detailed  statement  of  protest,  and  authorities, 
see  Byles,  Bills,  c.  19;  Daniel,  Neg.  Inst,  c  28;  Rand.  Com.  Paper,  c.  34; 
Tied.  Com.  Paper,  c.  17. 

i25Swayze  v.  Britton,  17  Kan.  G29;  Walker  v.  Turner,  2  Grat.  53G;  COM- 
MERCIAL BANK  V.  VARNUM,  49  N.  Y.  269;  Halliday  v.  McDougall,  20 
Wend.  (N.  Y.)  SO;  DENNISTOUN  v.  STEWART,  17  How.  (U.  S.)  00(J;  GALE 
v.  WALSH,  5  Term  R.  239. 

•  The  provisions  of  Neg.  Inst.  L.  §  264,  appear  to  be  declaratory.  Daniel, 
Neg.  Inst.  §  935;   Chalm.  Bills  Exch.  (4th  Ed.)  174. 

120  Union  Bank  v.  Hyde,  6  Wheat.  572;  BOROUGH  v.  PERKINS,  1  Salk. 
131;  2  Ld.  Raym.  992;  CARTER  v.  BANK,  7  Humph.  (Tenn.)  548.  As  to 
whetber  demand  of  payment  of  a  foreign  bill  may  be  made  by  a  notary's 
deputy,  see  CARTER  v.  BANK,  7  Humph.  (Tenn.)  548.     See  Neg.  Inst.  L.  §  2C0. 

127  Halliday  v.  McDougall,  20  Wend.  80. 

128  Carter  v.  Burley,  9  N.  H.  558;  Ticonic  Bank  v.  Stackpole,  41  Me.  302; 
Piner  v.  Clary,  17  B.  Mon.  645. 


■§§  141-144)  PRESENTMENT.  371 

(3)  An  inland  bill  or  promissory  note,  whether  inland  or  foreign, 
provided  it  be  unindorsed,^^®  not  being  originally  within  the  rules 
of  the  law  merchant,  is  not  subject  to  the  operation  of  this  rule. 
Statutes  t  in  most  of  the  states  have,  however,  sanctioned  the  prac- 
tice of  a  notary  public's  presenting  the  paper  by  putting  his  cer- 
tificate on  the  same  footing  with  that  of  a  notary  public  presenting 
a  foreign  bill  of  exchange.  It  is  true,  also,  that  in  case  of  inland 
hills  and  promissory  notes,  it  is  a  common  practice  for  a  notary 
public  to  be  employed  to  make  demand  of  payment  of  inland  bills 
and  promissory  notes  from  the  acceptors  and  makers,  and  also  to 
give  notice  of  the  dishonor  to  the  indorsers  thereon.  But  this  is  a 
mere  matter  of  convenience  and  arrangement  between  the  holder 
and  the  notary,  and  is  by  no  means  a  requisite  imposed  or  recog- 
nized by  law  as  binding  upon  the  holder.^^"  Even  after  protest, 
it  is  no  necessary  part  of  the  official  duty  of  a  notary  to  give  notice 
to  the  indorsers  of  the  dishonor  of  a  promissory  note,  although  cer- 
tainly it  is  a  very  convenient  and  useful  course  in  the  transactions 
of  such  affairs  in  commercial  cities.^^^  In  this  connection  it  is 
proper  to  add  the  additional  disconnected  principles:  That  the 
states  of  the  Union,  as  regards  each  other,  are  foreign  states,  and 
that,  when  it  is  sought  to  charge  non-residents,  the  intervention  of 
a  notary  public  is  necessary.^^^  And  that  if  no  notary  can  be  con- 
veniently found,  the  bill  may  be  protested  by  any  reputable  citizen 
of  the  place  where  the  bill  is  dishonored.^^^  When  protested  by  a 
private  citizen,  the  rule  that  protest  must  be  made  in  the  presence 
of  two  witnesses  is  probably  obsolete.^** 

129  Bonar  v.  Mitchell.  19  Law  J.  Exch.  302. 
t  See  Neg.  Inst.  L.  §  189. 

130  Bailey  v.  Dozier,  6  How.  23. 

181  DICKINS  V.  BEAL,  10  Tet.  582;  Morgan  r.  Van  Ingen,  2  Johns.  (N.  Y.) 
204;   Miller  v.  Hackley,  5  Johns.  384. 

182  COMMERCIAL  BANK  v.  VARNUM,  49  N.  Y.  2G9. 

133  BURKE  V.  McKAY,  2  How.  60;   Read  v.  Bank,  1  T.  B.  Mon.  (Ky.)  91. 

184  Daniel,  Neg.  Inst.  §  934a.  This  rule  is  enforced  by  Neg.  Inst.  L.  §  202. 
For  the  provisions  of  the  act  generally,  see  sections  2G0-268,  286,  289  (in  case 
of  acceptance  for  honor);   and  section  181  (waiver  of  protest). 


372  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  (Ch.   9> 

NOTICE    OF    DISHONOR. 

145.  NOTICE  OF  DISHONOR— Is  bringing,  either  ver- 
bally or  by  -writing,  to  the  know^ledge  of  the  dra^ver  or 
the  indorser  of  an  instrument,  the  fact  that  a  specified 
negotiable  instrument,  upon  proper  proceedings  taken, 
has  not  been  accepted,  or  has  not  been  paid,  and  that  the 
party  notified  is  expected  to  pay  it. 

146.  Notice  must  be  given  as  foUo^ws: 

(a)  By  the  holder  of  the  instrument,  or  by  any 

person  upon  -whom  a  liability  is  fixed  to 
any  person  upon  whom  it  is  sought  to  fix 
a  liability. 

(b)  Between  parties  residing   in  the   same  place, 

either  by  giving  it  personally,  verbally  or 
in  w^riting,  or  by  leaving  a  written  notice 
at  the  residence  or  place  of  business  of  the 
party  to  be  charged ;  between  parties  resid- 
ing in  different  places,  by  depositing  in  the 
post  oflB.ce,  postage  paid,  a  written  notice, 
properly  addressed  to  the  person  to  be 
charged. 
(o)  "Within  one  day  after  an  unqualified  refusal  to 
accept  the  bill  or  pay  the  instrument,  or  by 
an  indorser  w^ithin  one  day  after  he  has  re- 
ceived notice  of  his  own  liability.  This 
means  in  proper  hours  of  a  business  day 
betw^een  co-residents,  and  when  served  on 
a  non-resident,  by  or  before  the  last  post, 
if  there  be  one  the  next  day,  if  not,  in  the 
first   practicable  mail  thereafter. 

According  to  Lord  Denman,^"  the  notice  of  dishonor  Is  a  part 
and  parcel  of  the  contract  of  the  drawer  and  indorser,  and  not  a 
Btep  in  the  remedy  at  law  of  the  holder  to  recover  the  amount  of  the 

»»6  ROTHSCHILD  v.  CURRIE,  1  Q.  B.  43. 


4§   145-146)  NOTICE    OF    DISHONOR.  373 

bill  or  note.  To  repeat  the  substance  of  his  words,  the  drawer  and 
indorser  contract  to  pay  the  bill  or  note  upon  two  conditions:  One, 
the  dishonor  by  the  drawee,  acceptor  or  maker  on  due  presentment; 
the  other,  the  due  notification  to  him  of  such  dishonor.  And  taking 
up  the  latter  of  these  conditions,  we  purpose  in  this  and  the  suc- 
ceeding sections,  first,  to  examine  the  necessary  elements  constitut- 
ing this  portion  of  the  contract  of  the  drawer  and  indorser,  and  then 
to  classify  and  point  out  the  persons  and  the  methods  by  which  it  is 
<;arr:ed  into  effect. 
Sufficiency  of  Notice, 

Probably  the  most  imprrtant  test  of  a  notice  of  dishonor  is 
whether  or  not  the  words  bring  home  to  the  drawer  or  indorser  the 
knowledge  of  the  fact  that  he  is  legally  charged  with  liability  for 
the  payment  of  the  instrument.^*"  He  is  entitled  to  know,  first,  of 
the  breach  of  the  condition  to  accept  or  to  pay  the  instrument  on  the 
part  of  the  drawee,  maker  or  acceptor,  and,  second,  that  it  is  sought  to 
fix  a  liability  for  its  payment  upon  him.  The  first  object  of  notice 
is  therefore  to  inform  the  party  to  whom  it  is  sent  that  acceptance 
or  payment  has  been  refused  by  the  drawee,  acceptor  or  maker;  and 
the  second,  that  as  drawer  or  indorser  he  is  liable,  and  that  payment 
is  demanded  of  him.  The  important  question,  then,  is  to  determine 
what  is  due  and  proper  notice.  These  words  may  be  either  in  writ- 
ing or  verbal.  That  a  verbal  notice  is  proper  seems  settled  both  in 
New  York  and  elsewhere.^'*  No  precise  form  of  words  is  necessary 
to  express  this  purpose,  the  rule  being  merely  that  the  form  of  words 
used  must  be  such  as  to  convey  legal  notice  to  the  party.  In  this  a 
distinction  is  drawn  between  notice  of  dishonor  and  knowledge  of  dis- 
lujLoi'.  Tiir'juj^hout  the  cases  llie  statement  is  common  "that  knowl- 
edge of  tl\^  disbonor  of  a  bill  is  not  equivalent  to  notice  of  it,"  ^"'' 

i»«  See  Neg.  Inst.  L.  §§  166,  167. 

i88Cuyler  v.  Stevens,  4  Wend.  566;  Woodln  v.  Foster,  16  Barb.  146; 
TINDAL  V.  BROWN,  1  Term  R.  107;  HOUSEGO  v.  COWNE.  6  Law  J.  Exch. 
110;  Crosse  v.  Smitli,  1  Maule  &  S.  545;  Merrltt  v.  Woodbury,  14  Iowa,  299; 
First  Nat.  Bank  of  Iowa  City  v.  Ryerson,  23  Iowa,  508;  GILBERT  v.  DEN- 
NIS, 3  Mete.  (Mass.)  495. 

i8».IuniJita  Hiirik  v.  Hale,  10  Serg.  &  R.  157;  Bank  of  Old  Dominion  v.  Me- 
Voif,'li,  2!»  Oral.  550,  20  Grat.  852;  Brown  v.  Ferguson,  4  Lelyh,  37;  Jug«er  7. 
Bank.  53  Minn.  380,  55  N.  W.  545l 


374  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  (Ch.  9 

This  means  that  knowledge  which  is  equivalent  to  notice,  and  which 
will  make  a  drawer  or  indorser  responsible,  must  be  derived  from 
some  person  entitled  to  call  for  payment.  It  must  be  information 
that  the  bill  has  been  dishonored,  and  that  the  holder  is  in  a  position- 
to  sue  him.  In  other  words,  the  receipt  of  information  by  an  in- 
dorser tliat  an  instrument  is  unpaid  is  not  sufficient  to  fix  his  lia- 
bility. There  must  be  coupled  with  it  information  derived  from 
some  competent  person,  that  he,  the  indorser,  is  looked  to  for  its 
payment.^*" 

The  law  in  other  respects  has  formulated  certain  elements  for  con- 
stituting a  notice,  and  declares  notices  containing  them  sufficient 
to  bring  home  to  the  knowledge  of  the  drawer  and  indorser  the  fact 
that  he  is  charged  with  legal  liability.  These  elements  are:  "^  (1> 
That  the  notice  contain  a  sufficient  description  of  the  instrument, 
(2)  That  the  notice  expressly  or  impliedly  notify  the  drawer  or  in- 
dorser of  the  presentment,  demand  and  refusal  of  the  drawer,  ac- 
ceptor or  maker  to  accept  or  to  pay  the  instrument  (3)  That  the 
notice  inform  the  drawer  and  indorser  that  the  holder  looks  to  him 
for  payment,  though  this  element  is  not  indispensable  to  the  legality 
of  the  notice. 
Same — Ideniificntion  of  Instrument, 

The  common  form  of  identification  is  to  describe  the  instrument  by 
date,  amount,  and  parties,  and  state  where  it  is  awaiting  payment ;  but 
any  identification  which,  as  a  matter  of  fact,  would  indicate  unmis- 
takably to  a  business  man  of  ordinary  experience  what  instrument 
is  to  be  paid,  is  sufficient"*  This  rule  does  not  insist  upon  strict 
technical  accuracy.  Its  object  is  to  enable  the  indorser  notified  to- 
know  exactly  on  what  bill  or  note  he  has  incurred  liability,  and  the 

1*0  GAUNT  V.  THOMrSON.  7  C.  B.  400;  Miers  v.  Brown,  11  Mees.  &  W.  372, 

141  Artisans'  Bank  v.  Backus,  36  N.  Y.  100;  Storj-,  Prom.  Notes,  §  348; 
Daniel.  Nep.  Inst.  §  973;  Tied.  Com.  Taper,  §  344;  Glicksman  v.  Earley.  78  Wis, 
223,  47  N.  W.  272,  and  Jolms.  Cas.  Bills  &  N.  200. 

142  Gill  V.  ralmer,  20  Conn.  54;  Mossenjier  v.  Southey,  1  Man.  &  G.  7G; 
Housatonic  Bank  v.  Latlin,  5  Cusli.  54G;  Keynolds  v.  Appleman,  41  Md.  615;. 
MILLS  V.  BANK,  11  Wheat.  431;  Thompson  v.  Williams,  14  Cal.  162;  Tobey 
V.  Lennig,  14  Pa.  St.  483;  Ross  v.  Planters'  Bank.  5  Humph.  335;  Wood  v, 
Watson,  53  Me.  300;  Snow  v.  Perkins,  2  Mich.  238;  McCune  v.  Belt,  38  Mo, 
201.     See  Nog.  Inst.  L.  §  167  (form  of  notice). 


§§    145-146)  NOTICE    OF    DISHONOR,  375 

object  of  the  inquiry  of  the  court  is  to  ascertain  whether  or  not  he 
has  been  apprised  of  this  fact  The  notice  must  state  what  the  bill 
or  note  is/*^  and  must  not  be  calculated  in  any  way  to  mislead  the 
party  to  whom  it  may  be  given.  It  must  not  misdescribe  the  instru- 
ment, so  that  the  defendant  may  perhaps  be  led  to  confound  it  with 
some  other."*  The  description  of  the  bill  or  note  should  be  suffi- 
ciently definite  to  enable  the  indorser  to  know  to  what  instrument 
in  particular  the  notice  applies;  for  an  indorser  may  have  indorsed 
many  bills  or  notes  of  different  dates,  sums,  and  times  of  payment, 
and  payable  to  different  persons,  so  that  he  may  be  ignorant,  unless 
the  description  in  the  notice  is  special,  to  which  it  properly  applies 
or  which  it  designates.^"  And  in  determining  whether  the  de- 
scription of  the  note  or  bill  is  sufficient,  the  circumstances  of  the  case 
and  the  indorser's  knowledge  of  these  circumstances  may  be  taken 
into  consideration.^**  A  notice  which  omits  an  essential  feature  of 
the  indorsement  or  misdescribes  it  is  an  imperfect  one,  but  is  not 
necessarily  invalid.^*^  It  is  invalid  only  when  it  fails  to  give  that 
information  which  it  would  have  given  but  for  its  particular  imper- 
fection. And  even  in  case  the  notice  in  itself  be  defective,  if,  from 
the  evidence  of  the  attendant  circumstances,  it  is  apparent  that  the 
indorser  was  not  deceived  or  misled  as  to  the  identity  of  the  note, 

143  Daniel,  Neg.  Inst.  §  974.     But  see  HODGES  v.  SHULER,  22  N.  Y.  115. 

14*  Story.  Prom.  Notes,  §  349. 

146  Cook  V.  Litchfield,  9  N.  Y.  279;    Home  Ins.  Co.  v.  Green,  19  N.  Y.  519. 

146  Daniel,  Neg.  Inst.  §  976. 

147  In  HARRISON  v.  RUSCOE,  15  Mees.  &  W.  231,  Jt  was  shown  that  a  bill 
of  exchange  was  drawn  by  H,  Indorsed  by  him  to  B,  and  by  B  to  C,  in  whose 
hands  It  was  dishonored.  C's  attorney  gave  notice  in  due  time  ta  A,  but 
stated  therein,  by  mistake,  that  he  was  directed  by  B  (from  whom  he  had  no 
authority)  to  apply  for  payment  of  the  bill.  It  was  held  that  the  notice  of 
dishonor  was  sufficient,  notwithstanding  this  misrepresentation,  the  only  effect 
of  which  wa8  to  give  A  every  defense  against  C  that  he  would  have  had  if  the 
notice  had  really  been  given  by  B.  In  an  action  by  the  first  indorsee  of  a  bill 
against  the  drawer,  It  was  proved  that  the  plaintiff  wrote  a  letter  to  the  de- 
fendant, stating  the  bill  to  be  dishonored,  and  requiring  payment;  but  the 
letter  mlsdescribetl  the  bill  as  drawn  by  J.  H.  (the  acceptor),  and  accepted  by 
the  defendant.  Held,  that  this  was  sufficient  notice  of  dishonor.  Parke,  B., 
said:  "This  notice  Is  quite  sufficient  It  is  not  possible,  under  the  ciicum- 
utances,  that  the  defendant  could  have  been  misled  by  IL"  MELLEKSU  v. 
RII'PEN,  7  Exch.  57a 


376  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  (Ch.  9 

he  will  be  charged.***  It  thus  may  become  a  question  of  fact 
whether  or  not  from  the  contents  of  the  notice  itself  and  the  extrin- 
bIc  facts  admitted  into  the  case,  knowledge  of  the  dishonor  was  ac- 
tually brought  home  to  the  indorser.^*®  But  this  is  only  where 
there  is  doubt  whether  the  indorser  understood  what  particular  in- 
strument was  dishonored.  When  there  is  no  dispute  as  to  the  facts, 
the  sufficiency  of  the  notice  is  a  question  of  law  for  the  sole  inter- 
pretation of  the  court.*"'" 
Same — Statement  of  Presentment,  etc. 

When  there  can  be  no  doubt  that  the  mind  of  the  drawerorindorser 
identifies  the  bill  or  note  which  is  unpaid,  then  the  further  question 
Is  whether  the  notice  contained  a  statement  of  presentment,  demand, 
non-acceptance  or  non-payment  sufficient  to  comply  with  the  rules 
of  the  law  merchant.  This  is  a  question  of  law  and  of  construction 
peculiarly  the  province  of  the  court.*'*  Some  form  of  statement 
that  the  bill  or  note  has  been  duly  presented  and  dishonored  is  es- 
sential to  establish  the  claim  or  right  of  the  party  giving  notice, 
for  otherwise  he  will  not  be  entitled  to  any  payment  from  the  drawer 
and  indorser.*"^  Mere  notice  of  the  fact  that  the  bill  or  note  has 
not  been  paid  affords  no  proof  whatever  that  it  has  been  presented 
in  due  season,  or  even  that  it  has  been  presented  at  all.  And  if 
there  be  no  statement  of  the  dishonor  of  the  bill  or  note,  nor  any- 
thing from  which  it  can  be  fairly  implied  that  due  presentment  has 
been  made,  the  notice  is  fatally  defective.*^*  Whatever  will  show 
dishonor  is  sufficient*'*  No  particular  form  of  notice  is  necessary. 
The  holder  is  only  required,  in  such  language  as  he  may  adopt,  to 

>48  Carter  v.  Bradley,  10  Me.  62;  SMITH  v.  WHITING,  12  Mass.  6;  Moor- 
man V.  State  Bank,  3  Port  (Ala.)  353;  Kemer  v.  Downer,  23  Wend.  G20; 
KING  V.  HUH  LEY,  85  Me.  525,  27  Atl.  463. 

140  HODGES  V.  SHULER,  22  N.  Y.  114. 

»iBo  Cayuga  Co.  Bank  v.  Warden,  6  N.  Y.  19;   Dole  v.  Gold,  5  Barb.  494. 

161  Dole  V.  Gold.  5  Barb.  490. 

162  Lewis  V.  Gompertz,  6  Mees.  &  W.  402;  Wilkinson  v.  Adam,  1  Ves.  &  B. 
406;  Boulton  V.  Welsh,  3  Bing.  N.  C.  688.     See  Neg.  Inst.  L.  §  167. 

153  Page  V.  Gilbert,  60  Me.  488;  GILBERT  v.  DENNIS,  3  Mete.  (Mass.)  495; 
Phillips  V.  Gould,  8  Car.  &  P.  355;  Graham  v.  Sangston,  1  Md.  60;  Lockwood 
V.  Crawford,  18  Conn.  3G1;   Sinclair  v.  Lynah,  1  Speer,  244. 

154  Rowlands  v.  Springett,  14  Mees.  &  W.  7;  Shelton  v.  Braithwaite,  7  Mees. 
fc  W.  435;   Ex  parte  MOLINE,  19  Ves.  216. 


§§  145-146)  NOTICE   OF  DISHONOR.  877 

inform  the  indorser  that  the  drawee,  acceptor,  or  maker  has  neglect- 
ed to  accept  or  pay  the  bill  or  note;  that  the  contingency  on  which 
the  drawer's  or  indorser's  promise  to  pay  depended  has  happened, 
and  that  his  liability  has  become  absolute.  The  express  statement 
of  the  facts  of  presentment,  demand,  and  non-acceptance  or  non- 
payment, in  themselves,  is  unnecessary.  These  facts  may  be  con- 
veyed by  express  terms  or  by  necessary  implication.^"'  "I  should 
myself  doubt,"  says  Parke,  B.,^"  "whether  we  could  go  so  far  as  to 
say  that  it  ought  to  appear  upon  the  face  of  the  notice,  'by  express 
terms  or  necessary  implication,'  that  the  bill  was  presented  or  dis- 
honored. It  seems  to  me  enough  if  it  appear  by  reasonable  intend- 
ment, and  would  be  inferred  by  any  man  of  business,  that  the  bill 
had  been  presented  to  the  acceptor,  and  not  paid  by  him."  And 
where  no  mercantile  man,  upon  reading  the  notice,  could  possibly 
misunderstand  its  meaning,  that  is  deemed  within  the  meaning  of 
reasonable  intendment,  and  sufficient. 

Tbr-*  the  doctrine  of  reasonable  intendment  includes  such  terms  as 
^'dishcnoref^,,''  because  that  word  includes  presentment  and  de- 
mand,*^' or  "protested,"  ^^*  because  that  also  shows  presentment, 
derr.rua  an-^i  refusal,  or  such  other  words  coupled  with  a  statement 

16B  SOL^RTE  V.  PALMER,  1  Bing.  N.  C.  194. 

iBo  HEDGER  V.  STEAVEXSON,  2  Meefe.  &  W.  799.  In  this  case  the  follow- 
ing letter  from  the  plaintiff's  attorney  was  held  to  be  a  sufficient  notice: 
"Sir:  I  am  desired  by  Mr.  H.  to  give  you  notice  that  a  promissory  note  for 
£99.  ISs.,  payable  to  your  order  2  months  after  the  date  thereof,  became  due 
yesterday,  and  has  been  returned  unpaid;  and  I  have  to  request  you  will 
please  remit  the  amount  thereof,  with  Is.  6d.  noting,  free  of  postage,  by  return 
of  post.  I  am,  &c.,  J.  S."  The  holder  of  a  bill  of  exchange,  on  the  day  after 
it  became  due,  called  at  the  office  of  J.,  the  drawer.  The  latter  was  busy  at 
the  time,  and  the  holder  sent  him  the  following  note:  "B.'s  acceptance  to  J., 
£500,  due  12th  January,  Is  unpaid.  Payment  to  R.  &  Co.  is  requested  before 
4  o'clock."  This  was  held  to  be  sufficient  notice,  following  Parke,  B.,  in 
riEDGER  V.  STEAVENSON.  PAUL  v.  JOEL,  3  Hurl.  &  N.  455,  4  Hurl.  & 
N.  :vr.5. 

16-  Stocken  v.  Collins,  9  Car.  &  P.  653;  WOODTHORPE  v.  LAWES,  2  Mees. 
&  W.  109;   Edmonds  v.  Gates,  2  Jur.  183;    Smith  v.  Boulton,  Hurl.  &  W.  3. 

1B8  MILLS  V.  BANK,  11  Wheat.  431;  Cayuga  Co.  Bank  v.  Warden,  1  N.  Y. 
413;  Gnigeon  v.  Sraltli,  G  Add.  &  E.  499;  Everard  v.  Wilson.  1  El.  &  Bl.  801; 
De  Wolf  V.  Murray,  2  Sandf.  IGG. 


378  PRESENTMENT    AND    NOTICE    OF   DISHONOR,  (Ch.  S" 

of  non-payment  as  "Your  bill  is  this  day  returned  with  charges,"  or 
"with  charges  or  protested  exchange."      And  a  very  good  illustra- 
tion of  how  the  doctrine  of  reasonable  intendment  enlarges  the  rule 
is  in  the  distinction  between  sufficient  notice  of  dishonor  of  paper 
made  payable  at  a  bank  or  other  particular  place,  and  notice  of  dis- 
honor of  paper  made  payable  at  large.^"*     If  made  payable  at  a 
bank  or  other  particular  place,  it  is  the  business  of  the  maker  or  ac- 
ceptor to  have  funds  at  that  place  when  the  paper  becomes  due. 
His  failure  to  do  so  amounts  to  a  dishonor,  and  it  is  sufficient  to  in- 
form the  indorser  of  this  failure.      No  specific  statement  of  demand 
and  presentment  is  necessary.      A  statement  to  the  indorser  of  non- 
payment, if  it  appears  that  the  paper  was  at  the  bank  at  the  time  of 
its  maturity,  is  sufficient,  because  such  a  statement  can  mean  noth- 
ing else  than  the  dishonor  of  the  paper.     If,  on  the  contrary,  the 
paper  is  payable  at  large,  a  statement  of  presentment  and  demand 
is  necessary,  because  a  personal  demand  of  the  maker  is  one  prereq- 
uisite of  dishonor.^'"     Such  expressions  as  "due  and  unpaid,"*'^ 
"that  the  note  remains  unpaid,"  ^""   "notice    of    non-payment,"  *" 
have  been  held  insufficient,  because  the  fact  alone  that  the  acceptor 
or  maker  has  not  paid  the  instrument  is  immaterial  to  the  liability 
of  the  indorser.      The  legal  fact  which  fixes  the  indorser's  liability 
is  the  demand  of  payment  of  the  parties  and  the  dishonor  of  the 
bill.^°*     It  is  a  better  practice  to  state  that  the  party  holding  the 
bill  looks  to  the  person  notified  for  payment,  but  this  in  itself  is  not 
indispensable.      The  reason  is  that  this  is  implied  in  the  very  act 
of  giving  notice.^®*      Notice  that  acceptance  or  payment  has  been 
demanded  of  the  drawee,  maker,  or  acceptor  and  refused  by  him  is 
sufficient  to  charge  the  drawer  or  indorser;  ^*«  and  it  certainly  can- 

1B9  See  Bigelow.  Bills  &  N.  p.  277, 

160  Dole  V.  Gold,  5  Barb.  490. 

161  Gilbert  v.  Dennis,  3  Mete.  (Mass.)  49S. 

162  Pinkliam  v.  Macy,  9  Mete.  (Mass.)  174. 

163  Townsend  v.  Ix)rain  Bank,  2  Ohio  St  355. 

164  Hartley  v.  Case,  4  Bam.  &  C.  339,  10  C.  L.  R.  606;  Boulton  v.  Welsh.  3 
Bing.  N.  C.  688,  32  C.  L.  R.  283;  Strange  v.  Price,  10  AdoL  &  El.  12.5,  37  C.  L. 
R.  88;   Furze  v.  Sbarwood.  2  Adol.  &  El.  (N.  S.)  388,  42  C.  L.  R.  726. 

185  Cowles  V.  Harts,  3  Conn.  517;  Shrieve  T.  Duckbam,  1  Litt  (Ky.)  194; 
Warren  v.  Gilman,  17  Me.  360. 

168  Fitchburg  Ins.  Co.  v,  Davis,  121  Mass.  121;  Bank  of  U.  S.  v.  Carneal,  2 
Pet.  543. 


§§  145-146)  NOTICE   OF   DISHONOR.  379 

iiot  be  argued  that  it  is  necessary  to  state  what  the  law  itself  im- 
plies,— that  the  drawer  or  indorser  is  to  be  looked  to  to  pay  the  in- 
strument if  the  acceptor  or  maker  does  not  pay  it.^*' 

By  TTAom  I^otice  should  he  Owen. 

In  pointing  out  the  persons  and  process  by  which  knowledge  is 
brought  home  to  the  party  to  be  charged  with  liability,  the  law 
follows  principles  analogous  to  those  used  in  formulating  the  ele- 
ments to  be  used  in  the  notice  itself.  The  aim  is  to  establish  a 
process  such  that  a  business  man  of  ordinary  experience,  when  pro- 
ceeded against,  would  know  that  he  would  have  to  pay  to  the  hold- 
er the  amount  of  the  instrument.  The  first  element  of  this  process 
is  the  rule,  already  alluded  to,  that  to  change  knowledge  into  legal 
notice  the  fact  of  dishonor  must  be  brought  home  to  the  party  to  be 
charged  by  some  person  having  an  interest  in  enforcing  the  bill  or 
note.  Notice  must  be  by  a  party  or  by  some  person  authorized  to 
give  it.  A  notice  by  a  mere  stranger  is  not  sufficient.^®*  Properly 
authorized  persons  are  an  agent  of  the  holder,  who  may  give  no 
tice,  because,  in  doing  so,  he  represents  and  acts  on  behalf  of  his 
principal.^®®  A  notary,^^"  acting  in  his  official  character,  is  an  ex- 
ample of  this.     An  attorney  is  also  such  an  agent,^^^  and  so  a  col- 

i«7  Furze  v.  Sharwood,  2  Gale  &  D.  116.  2  Q.  B.  416,  42  E.  C.  L.  726;  Miers 
V.  Brown,  11  Mees.  &  W.  372;  Nelson  v.  Bank,  16  C.  C.  A.  425,  69  Fed.  798; 
SALOMON  V.  LEATHER  CO.  (N.  J.  Err.  &  App.)  31  Atl.  602.  Notice  of  dis- 
honor in  these  words:  "I  hereby  give  notice  that  a  bill  for  £50,  at  3  months 
after  date,  by  A  upon  and  accepted  by  B,  and  indorsed  by  you,  lies  at"  etc.. 
"dishonored,"— was  held  sufficient  without  further  intimation  that  plaintiff 
looked  to  defendant  for  payment.     KING  v.  BICKLEY,  2  Q.  B.  419. 

168  CH.\NOINE  V.  P^OAVLEH,  3  Wend.  (N.  Y.)  173;  Sewall  v.  Russell.  Id. 
276;  Lawrence  v.  Miller,  16  N.  Y.  235;  Stanton  v.  Blossom,  14  Mass.  116; 
STEW.\RT  V.  KENNETT,  2  Camp.  177.  In  this  case  it  was  said  by  Lord 
Ellenborough  that  "the  notice  must  come  from  the  person  who  can  give 
the  drawer  or  indorser  his  immediate  remedy  upon  the  bill;  otherwise  It 
l8  merely  an  historical  fact."     Brailsford  v.  Williams,  15  Md.  150. 

i«9  Neg.  Inst.  L.  §  162.     Of  sections  161,  165. 

170  SHED  V.  BRETT,  1  Pick.  (Mass.)  401;  BANK  OF  UTICA  v.  SMITH,  IS 
Johns.  (N.  Y.)  230;  Renick  v.  Robbins,  28  Mo.  339;  Swayze  v.  Brltton,  17 
Kan.   629. 

17  1  Filth  V.  Thrush,  8  Barn.  &  C.  387.  A  bill  of  exchange,  indorsed  In 
lilank,  was  left  by  the  indorsee  at  the  office  of  an  attorney  to  be  presented. 
On   presentment  by  the   attorney   the   bill   was  dishonored.    The   attorney 


380  PRESENTMENT   AND    NOTICE   OF    DISHONOR.  (Ch.    9 

lecting  bank  is  an  agent  for  transmitting  notices,*'^'  or,  more  ac- 
^-urately  speaking,  is  a  principal  for  the  purpose  of  transmitting 
notice  of  protest,  and  its  notary  who  protests  its  paper  is  the 
agent."*  But  with  these  exceptions,  due  to  the  doctrine  of  agency 
that  the  agent  is  in  law  the  same  as  the  principal,  the  notice  must 
emanate  from  some  person  who  is  a  party  to  the  bill.  This  does 
not  mean  the  holder  alone,*'*  because,  if  the  holder  only  could  give 
notice,  then  he  might  secure  his  own  rights  against  his  immediate 
indorser,  but  the  latter  and  every  other  party  to  the  bill  would  be 
deprived  of  all  remedy  against  the  anterior  indorsers  and  drawer, 
unless  each  of  these  parties  should  in  succession  take  up  the  bill 
immediately  on  receiving  notice  of  dishonor, — a  highly  unreasonable 
position.*^'  But  by  a  party  to  a  bill,  so  far  as  it  relates  to  the  per- 
son who  gives  notice,  is  meant  some  party  who  might  be  compelled 
to  pay  it  to  the  holder,  and  who,  upon  taking  it  up,  would  have  a 

wrote  to  the  drawer  on  the  following  day,  describing  the  bill,  and  stating 
that  it  had  been  dishonored,  and  subscribed  his  name  and  residence.  This 
was  held  a  sufficient  notice  of  dishonor,  though  the  attorney  did  not  state 
In  whose  behalf  he  applied,  nor  where  the  bill  was  lying.  WOODTIIORPE 
V.  LA  WES,  2  Mees.  &  W.  109. 

172  Bank  of  U.  S.  v.  Davis,  2  Hill.  45'x,  "Where  the  instrument  has  been 
dishonored  in  the  hands  of  an  agent,  be  may  either  himself  give  notice  to 
the  parties  hable  thereon,  or  he  may  himself  give  notice  to  his  principal. 
If  he  give  notice  to  his  principal,  he  must  do  so  within  the  same  time 
as  if  he  were  the  holder;  and  the  principal  upon  the  receipt  of  such  notice 
has  himself  the  same  time  for  giving  notice  as  if  the  agent  had  been  an 
independent  holder."  Neg.  Inst  L.  §  165.  This  Is  declaratory  of  the  law 
in  cases  of  agency  for  collection.  HOWARD  v.  IVES,  1  Hill  (N.  Y.)  2G3; 
Church  V.  Barlow,  9  Pick.  (Mass.)  547;  SCOTT  v.  LIFFOKD,  9  East,  347. 
The  various  branches  of  one  bank  are  within  the  rule.  Clode  v.  Bayley, 
12  Mees.  &  W.  51;  Prince  v.  Bank,  3  App.  Oas.  332;  Bank  of  U.  S.  v. 
Goddard,  5  Mason,  3G6,  Fed.  Cas.  No.  917;  Fielding  &  Co.  v.  Corry,  40  Wkly. 
Rep.  97  (under  Bills  of  Exchange  Act).  See  Daniel,  Neg.  Inst  §  992;  Benj. 
Chalm.  Bills  &  N.  190. 

178  HOWARD  V.  IVES,  1  Hill  (N.  Y.)  263. 

174  TINDAL  V.  BROWN,  1  Term  R.  167;  CHAPMAN  v.  KEANE,  3  Adol. 
&  El.  193.  This  case  held  that  an  indorsee  who  has  indorsed  over,  and  is 
not  the  holder  at  the  time  of  maturity  and  dishonor,  may  give  notice  at 
such  time  to  an  earlier  party,  and,  upon  afterwards  taking  up  the  bill  and 
suing  such  party,  may  avail  himself  of  such  notice. 

176  West  River  Bank  v.  Taylor,  34  N.  Y.  128. 


§§  145-146)  NOTICE    OF    DISHONOR.  381 

right  to  reimbursement  from  the  party  to  whom  the  notice  is  given,* 
The  liability  of  the  party  must  be  fixed  before  he  is  competent  to 
give  notice,  although  he  need  not  know  it  is  fixed  when  he  sends 
the  notices  out.^''"  And  the  test  between  the  party  to  the  bill,  in 
the  sense  we  have  given  it,  and  the  stranger  to  the  bill,  is  whether 
the  party  giving  or  given  the  notice  would  be  liable  upon  the  instru- 
ment.^'^'^  The  reason  for  this  rule  is  that,  unless  this  liability  is 
fixed,  there  can  be  no  inference  that  the  person  giving  the  notice 
looks  to  the  party  to  whom  it  is  addressed  for  payment;  whereas, 
on  the  contrary,  when  the  liability  is  fixed,  and  the  holder  gives  the 
notice,  it  must  mean,  if  it  means  anything,  that  he  looks  to  the  party 
notified  for  payment.^''®  This  rule  excludes,  not  only  the  person 
who  is  in  no  wise  a  party  to  the  instrument,  but  also  the  person  who 
has  been  a  party  to  the  instrument  and  liable  thereon,  but  whose 
liability  is  discharged.  "The  mischief  would  happen,"  says  Parke, 
r».,'^^  "that  there  might  be  a  bill  with  twenty  indorsements  which 
the  holder  might  retain  twenty  days  after  its  dishonor  and  then  re- 
cover against  the  drawer,  on  a  notice  then  given  to  him  by  the  first 
indorsee,  which  that  indorsee  could  not  do.  Such  a  notice  would 
not  be  in  good  time  if  given  by  the  first  indorsee,  and  would  there- 
fore be  bad  and  not  support  an  action  by  the  last.  The  rule  equally 
excludes  the  case  of  notice  by  an  acceptor  who  never  could  sue  him- 
self upon  the  bill  after  taking  it  up." 

To    W/iose  Benefit  Notice  Accrues, 

Notice  sent  to  an  indorser  or  drawer  accrues  to  the  benefit  of  all 
parties  subsequent  to  the  party  notified.f  The  holder  may  be  satis- 
fied with  giving  notice  to  his  immediate  indorser,  or  he  may  give  no- 
tice to  the  drawer  and  all  the  indorsers,  and  if  he  does  it  will  ac- 

*This  rules  excludes  the  acceptor  (HARRISON  v.  RUSCOE,  15  Mees.  & 
W.  231)  and  the  maker  (Jagger  v.  Bank,  53  Minn.  38G,  55  N.  W.  545).  There 
are,  however,  cases  to  the  contrary,  and  as  matter  of  authority  Mr.  Daniel 
maintains  that  an  acceptor  may  give  notice,  whatever  the  merit  of  the 
doctrine.     Daniel,  Neg.  Inst.  §  990.     See  Neg.  Inst.  L.  §  16L. 

iT6jE\Mxos  V.   ROBERTS,  24  Law  J.   Q.   B.   102. 

1T7  HARRISON   V.   RUSCOE,   15   Mees.   &  W.  231. 

»T8  East  V.  Smith,  4  Dowl.  &  L.  744. 

"8  HARRISON  V.  RUSCOE.  15  Moos.  &  W.  231;  Turner  v.  Leech,  4  Barn. 
&  Aid.  451;    ROWE   v.  TIPrER,   13  C.  B.  249. 

t  See  Nog.  Inst.  L.  §§  1G3,  1G4« 


382  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  (Ch.   9 

cnie  to  the  benefit  of  each  indorser.^'°  This  rule  is  the  natural  out- 
growth of  the  rule  that  notice  need  not  be  given  by  the  holder  of  a 
bill,  but  can  be  given  by  any  party  to  the  instrument.  For,  as  has 
just  been  said,  the  holder  may  only  seek  to  secure  his  rights  against 
his  immediate  indorser  by  regular  notice  to  him  alone.  And  in  or- 
der, therefore,  that  the  latter  and  every  other  party  to  the  instru- 
ment may  not  be  dei)rived  of  all  remedy  against  anterior  indorsers 
and  the  drawer,  it  is  prudent  in  each  party  who  receives  a  notice  to 
give  immediate  notice  to  those  parties  against  whom  he  may  have 
the  right  to  claim. ^^^  Whether  there  be  few  or  many  indorsers,  the 
duty  of  each  is  the  same.  It  is  to  transmit  the  notice  from  one 
indorser  to  another,  in  the  usual  order  of  their  indorsements.^®^ 
And,  in  turn,  as  notice  is  received  by  each  indorser,  it  accrues  to 
the  benefit  of  all  subsequent  j)arties.  Thus,  for  example,  if  the  hold- 
er notifies  his  immediate  indorser,  and  he,  in  turn,  notifies  his  im- 
mediate indorser,  and  so  on,  through  the  chain  of  indorsers,  up  to 
the  second  and  first  indorser,  the  first  indorser  cannot  object  that 
he  has  received  no  notice  from  the  holder.  The  holder  can  avaiJ 
himself  of  the  notice  given  the  first  indorser  by  the  second  indorser. 
It  is  sufficient  if  the  first  indorser  had  notice  from  any  subsequent 
holder  of  the  note  of  the  default  of  the  maker,  and  that  he  would 
be  looked  to  for  payment.^®* 

180  Jameson  v.  Swinton,  2  Taunt.  224;  Hilton  v.  Shepherd,  6  East,  14,  note; 
STAFFORD  v.  YATES,  18  Johns.  (N.  Y.)  327;  Morgan  v.  Van  Ingen,  2  Johns. 
(N.  Y.)  204;  Spencer  v.  Ballou,  18  N.  Y.  327.  Note— It  is  the  rule  to  notify  all 
indorsers,  e.  g.  indorsers  for  collection;  accommodation  drawer  or  indorser; 
indorsers  of  bills  or  notes  payable  on  demand;  each  partner,  as  well  as  the 
firm,  by  name;  each  of  the  joint  indorsers;  persons  representative,  If  any; 
if  none,  then  some  autliorized  person  at  the  family  residence;  the  bankrupt 
personally;  and  to  the  assignee  of  the  bankrupt.  For  cases,  see  Tied.  Com. 
Paper,  §  336,  and  cases  cited. 

181  Bayley,  Bills,  p.  256;    CHAPMAN  v.  KEANB,  3  Adol.  &  El.  193. 

182  Dobree  v.  Eastwood,  3  Car.  &  P.  250;  BANK  OF  UTICA  v.  SMITH, 
18  Johns.  230;  Mead  v.  Engs,  5  Cow.  303;  West  River  Bank  v.  Taylor, 
34  N.  Y.  128;    Morgan  v.  Woodworth,  3  Johns.  Cas.  89. 

183  STAFFORD  v.  YATES,  18  Johns.  (N.  Y.)  327;  Spencer  v.  Ballou,  IS 
N.  Y.  327;  LYSAGHT  v.  BRYANT,  9  C.  B.  46;  Wilson  v.  Swabey,  1  Starkie, 
M;  Marr  v.  Johnson,  9  Yerg.  1;  Triplett  v.  Hunt,  3  Dana,  126;  Stanton 
V.  Blossom,  14  Mass.  116;  Bank  of  United  States  v.  Goddard,  5  Mason,  3U:j, 
Fed.   Cas.    No.   917. 


§§  145-146)  NOTICE    OF    DISHONOR.  383 

To  Wlurni  Notice  should  he  Given. 

The  question  to  whom  notice  should  be  given  is  involved  in  the 
discussion  of  the  method  of  giving  notice,  which  will  be  taken  up  in 
the  next  paragraph.  In  general,  however,  it  may  be  said  that  no- 
tice of  dishonor  may  be  given  to  the  party  himself  or  to  his  agent 
in  that  behalf.^^*  If  the  party  is  dead,  but  his  death  is  unknown  to 
the  party  giving  notice,  notice  sent  as  if  the  party  to  be  notified 
were  living  is  sufficient.^*'^  If  his  death  be  known,  the  notice  must 
be  given  to  a  personal  representative,  if  such  there  be,  and  if  with 
reasonable  diligence  he  can  be  found.^*'  If  there  be  no  personal 
representative,  notice  may  be  sent  to  the  last  residence  or  last  place 
of  business  of  the  deceased;  ^*^  but  if  the  deceased  left  a  will,  and 
the  executor  named  has  not  qualified,  or  has  renounced  his  trust, 
notice  may  be  sent  either  to  the  person  named  or  to  the  last  resi- 
dence or  place  of  business  of  the  deceased.^®*  Where  the  parties  to 
be  notified  are  partners,  notice  to  any  one  partner  is  notice  to  the 
firm,  even  though  there  has  been  a  dissolution.^^*  Notice  to  joint 
parties  who  are  not  partners  must  be  given  to  each  of  them,  unless 
one  of  them  has  authority  to  receive  such  notice  for  the  others.^®" 

184  HOUSEGO  V.  COWNE,  2  Mees.  &  W.  348;  ALLEN  v.  EDMUNDSON, 
2  Exch.  719,  724;  Viale  v.  Michael.  30  Law  T.  (N.  S.)  4G3;  Fassin  v.  Hub- 
bard, 55  N.  Y.  465;  Lake  Shore  Nat.  Bank  v.  Colliery  Ck).,  51  Hun,  63,  3  N. 
Y.  Supp.  771.     See  Neg.  Inst.  L.  §  168. 

186  Maspero  v.  Pedesclaux,  22  La.  Ann.  227;  Linderman  v.  Guldin,  34 
Pa.  St.  54. 

188  MASSACHUSETTS  BANK  v.  OLIVER,  10  Cush.  (Mass.)  557;  Oriental 
Bank  v.  Blake,  22  Pick.  (Mass.)  206;  Cayuga  Bank  v.  Bennett,  5  Hill  (N.  Y.) 
236.  See  Neg.  Inst.  L.  §  1(59.  As  holding  that  a  notice  of  dishonor  mailed 
with  the  address,  "to  the  estate  of  H.  O.,  deceased,"  will  not  be  such  notice  as 
to  charge  the  executor,  see  MASSACHUSETTS  BANK  v.  OLIVER,  supra; 
Cayt^a  Bank  v.  Bennett,  supra. 

18T  STEWART  V.  EDEN,  2  Caines  (N.  Y.)  121;  MERCHANTS'  BANK  v. 
BIRCH,  17  Johns.  (N.  Y.)  25;  Dodson  v.  Taylor,  56  N.  J.  Law,  11,  28  Atl. 
310.     See  Neg,  Inst.  L.  §  169. 

188  Goodnow  V.  Warren,  122  Mass.  79. 

188  Hubbard  v.  Matthews,  54  N.  Y.  50;  Dabnoy  v.  Stidger,  12  Miss.  740; 
Coster  V.  Thomason,  19  Ala.  717;  FOURTH  NAT.  BANK  v.  UEUSCilEN.  52 
Mo.   207.     See    Neg.    Inst.    L.    §    170. 

190  WILLIS  V.  GREEN,  5  Hill  (N.  Y.)  232;  State  Bank  v.  Slaugiiter,  7 
Blackf.  (lud.)  133;  People's  Bank  v.  Keech,  26  Md.  521.  See  Neg.  Inst  L. 
J    ilL 


384  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  (Ch.  9 

If  the  party  to  be  notified  is  a  bankrupt,  but  no  assignee  has  been 
appointed,  notice  to  the  bankrupt  is  sufficient;  ^'^  if  an  assignee  has 
been  appointed,  notice  may  probably  be  given  either  to  the  bank- 
rupt or  to  the  assignee.^" 

Metlwd  of  Gimng  Notice. 

The  second  element  of  process  relates  to  the  method  of  actually 
giving  notice,  which  presents  itself  in  two  aspects.  The  first  is  giv- 
ing notice  verbally  or  in  writing;  the  second  is  of  serving  the  no- 
tice in  writing  personally  or  serving  it  by  mail.  While  the  requi- 
sites of  verbal  notices  are  not  clearly  stated  by  the  courts,  it  seems 
to  be  agreed  that,  where  no  statute  intervenes,  a  verbal  notice  is 
suflQcient.^"  It  also  seems  to  be  enough  if,  from  the  conversations 
between  the  parties,  it  can  be  ascertained  as  a  fact  that  the  party 
against  whom  the  liability  is  sought  to  be  enforced  well  understood 
what  instrument  was  referred  to.  The  courts  are  less  strict  in  con- 
struing a  verbal  notice  than  in  construing  a  written  one.  This  is 
because  a  verbal  notice  communicated  to  the  indorser,  which  calls 
forth  a  conversation  about  the  instrument  in  question,  is  very  differ- 
ent from  a  written  notice  sent  to  the  indorser.  The  latter  consti- 
tutes the  only  means  which  the  party  has  to  inform  the  drawer  and 
indorser  of  the  particular  instrument  dishonored.  With  a  verbal 
notice,  however,  the  drawer  or  indorser  has  full  opportunity  of  in- 
forming himself  fully  of  the  character  of  the  instrument  and  of  the 
liability  sought  to  be  enforced  against  him.^"*  It  is  almost  need- 
less to  say  that  the  verbal  notice  must  be  given  to  the  indorser  per- 

»»i  Ex  parte  MOLINE,   19  Ves.  216. 

i»2  Callahan  v.  Bank,  82  Ky.  231;  AMERICAN  NAT.  BANK  v.  MANUFAC- 
TURING CO.,  94  Tenn.  624.  30  S.  W.  753.  House  v.  Bank,  43  Ohio  St.  346, 
1  N.  E.  129.  contra.     See  Rand.  Com.  Paper,  §  1243;   Neg.  Inst.  L.  §  172. 

183  Cnyler  v.  Stevens,  4  Wend.  5G6;  Cayuga  Co.  Bank  v.  Warden,  1  N.  Y. 
413;  Woodin  v.  Foster,  16  Barb.  (N.  Y.)  14G;  GILBERT  v.  DENNIS,  3  Mete 
(Mass.)  495;  TINDAX  v.  BROWN,  1  Term  R.  1G7;  Glasgow  v.  Pratte,  8 
Mo.  336;  Merritt  v.  Woodbury,  14  Iowa,  299;  Boyd  v.  City  Sav.  Bank,  15 
Grat.  501;  Pierce  v.  Schaden.  55  Cal.  406.  See  Neg.  Inst.  L.  §  167.  As  to 
notice  by  telephone,  C.  C.  Thompson  &  Walkup  Co.  v.  Appleby,  5  Kan.  App. 
680,  48  Pac.  933. 

i»*  Metcalfe  v,  Richardson,  11  C.  B.  1011;  Phillips  v.  Gould,  8  Car.  «&  P. 
355;    Thompson  v.  Williams,   14  Cal.   162. 


§§  145-146)  NOTICE    OF    DISHONOR.  385 

sonally,  or  ^o  some  suitable  person  at  his  residence  or  place  of  busi- 
ness.^^"*     Mere  hearsay  does  not  create  a  binding  liability.^®® 

The  essentials  of  a  written  notice  have  been  already  described. 
Its  service  may  be  made  by  delivering  it  personally  to  the  person  to 
be  charged,^"^  or  by  leaving  it  at  his  dwelling  place  or  place  of  busi- 
ness/*® or  it  may  be  served  upon  him  by  mail.  The  object  of  the 
courts  is  to  formulate  a  set  of  rules  which,  if  followed,  will  render  it 
reasonably  certain  that  the  notice  of  dishonor  will  reach  the  hand 
of  the  drawer  and  indorser,  and  charge  him  with  notice  or  knowl- 
edge of  his  liability  upon  the  instrument.^^*  To  attain  this  end  the 
legislatures  of  many  states  have  pointed  out  methods  of  service 
which,  if  followed,  are  of  course  legal  and  proper  in  the  jurisdictions 
in  which  those  legislatures  are  sovereign.^"**     But,  in  the  absence 

186  A  person  who  was  sent  by  the  holder  of  a  dishonored  bill  called  at 
the  house  of  the  drawer  the  day  after  it  became  due,  saw  the  drawer's  wife, 
and  told  her  that  he  had  brought  back  the  bill  that  had  been  dishonored.  She  said 
she  knew  nothing  about  it,  but  would  tell  her  husband  of  it  when  he  came 
home.  The  party  then  left,  leaving  no  written  notice.  It  was  held  that  suf- 
ficient notice  had  been  given.  HOUSEGO  v.  COWNE,  2  Mees.  &  W.  348; 
ALLEN  V.  EDMUND  SON,  2  Exch.  719,  per  Parke,  B. 

i»8  Woodin  V.  Foster,  16  Barb.  146. 

i»7  Smedes  v.  Utica  Bank,  20  Johns.  372;  Louisiana  State  Bank  v.  Rowel, 
6  Mart.  (N.  S.)  500;  Shepard  v.  Hall,  1  Conn.  329;  Hartford  Bank  v.  Stedman, 
3  Conn.  489;  BANK  OF  COLUMBIA  v.  LAWRENCE,  1  Pet.  578;  RANSOM 
V.  MACK,  2  Hill,  590;  HOBBS  v.  STRAINE,  149  Mass.  212,  21  N.  E.  305, 
Johns.  Cas.  Bills  &  N.  202. 

i»8  BANK  OF  COLUMBIA  v.  LAWRENCE,  1  Pet.  578;  Nevius  v.  Bank, 
10  Mich.  547;  Sanderson  v.  Reinstadler,  31  Mo.  483;  Grinman  v.  Walker, 
9  Iowa,  426.  As  to  question  of  due  diligence  in  ascertaining  residence, 
see  Bank  of  Utica  v.  Bender,  21  Wend.  (N.  Y.)  643.  In  the  case  of  ALLEN 
V.  EDMUNDSON,  2  Exch.  719,  it  appeared  that  the  holder  of  an  overdue  note 
of  exchange  went  during  business  hours  to  the  counting  house  of  the  drawer, 
for  the  purpose  of  giving  notice  of  dishonor;  and,  finding  the  counting- 
house  door  shut,  he  knocked  at  the  door,  and,  no  one  answering,  he  came 
away  without  leaving  any  notice.  It  was  held  that  these  facts  did  not  sup- 
port an  allegation  of  due  notice,  but  were  equivalent  to  a  dispensation  of 
notice,  and  ought  to  have  been  so  pleaded. 

lO'Bank  of  U.  S.  v.  Corcoran,  2  Pet.  121;  Carolina  Nat.  Bank  v.  Wallace, 
13  S.  C.  347;  Manchester  Bank  v.  Fellows,  28  N.  II.  3<)2;  Bradley  v.  Davis. 
26  Me.  45;   SIIELBURNE  FALLS  NAT.  BANK  V.  TOWNSLEY,  107  Mass.  444. 

200  "It  may  in  all  cases  be  given  by  delivering  It  personally  or  through 
the  mails."     Ncg.  Inst.  L.  S  167.     Cf.  sections  177,  179. 
NEG.BILLS.— 25 


386  PRESENTMENT    AND    NOTICE    OF   DISHONOR.  (Ch.   9 

of  statutory  regulation,  the  methods  of  service  adopted  by  the  courts 
are  divided  into  two  classes,  according  as  the  party  giving  notice 
and  the  party  to  whom  it  is  given  reside  in  the  same  or  different 
places.  There  are  various  judicial  interpretations  of  the  term  "res- 
idence in  the  same  place."  One,  dependent  upon  slight  authority, 
is  that  the  corporate  limits  of  the  village,  town,  or  city  define  the 
limits  as  to  the  requirements  of  personal  notice,^"^  meaning  that  per- 
sons residing  within  those  limits  are  co-residents  and  without  are 
non-residents  as  to  each  other.  The  second  is  that  all  persons  art 
to  be  regarded  as  co-residents  who  receive  their  mails  through  the 
same  post  office,  because  the  post  office  can  only  be  used  in  the  serv- 
ice of  a  notice  as  a  means  of  transmission  and  not  of  deposit.  This 
means  that  the  drawer  and  indorser  cannot  be  subjected  to  the  un 
certain  chance  of  getting  mail,  but  the  holder  must  exert  himself  to 
make  personal  service  or  its  equivalent  upon  him.^°*  But  this  rule 
is  qualitied  by  the  further  one  that  where  the  drawer  or  indorser 
has  no  residence  and  no  regular  place  of  business  in  the  city  or 
town  where  the  holder  resides,  or  the  instrument  is  i)!iynl)Ie,  he  may 
be  treated  as  a  non-resident  and  served  by  mall.^"^  It  being  deter- 
mined whether  the  party  giving  the  notice  and  the  party  to  whom 
it  is  given  are  residents  of  the  same  or  different  places,  the  follow- 
ing rules  prevail: 

(1)  If  of  the  same  place,  the  service  must  either  be  personal  -°*  or 

«oi  Barret  v.  Evans,  28  Mo.  333. 

202  Ireland  v.  Kip.  10  Johns.  (N.  Y.)  490,  11  Johns.  (N.  Y.)  231;  SHEL- 
BURNE  FALLS  NAT.  BANK  v.  TOWNSLEY,  102  Mass.  177,  107  Mass.  444; 
Farmers'  &  M.  Bank  v  Battle,  4  Humph.  (Tenn.)  86;  Barker  v.  Hall,  Mart. 
&  Y.  (Tenn.)  183;  Forbes  v.  Omaha  Nat.  Bank,  10  Neb.  338,  6  N.  W.  393.  As 
holding  that  notice  of  dishonor  sent  through  the  mail  will  not  be  sufficient 
where  both  parties  (sender,  and  the  one  to  whom  the  notice  is  sent)  are 
residents  of  the  same  town,  see  SHELDON  v.  BENHAM,  4  Hill  (N.  Y.)  129. 
As  holding  that  a  notice  of  dishonor  mailed  to  an  indorser,  and  received 
the  day  after  that  on  which  the  note  became  due,  was  sufficient,  even  where 
the  postoffice  was  in  the  same  town,  see  SHAYLOR  v.  MIX,  4  Allen  (Mass.) 
351. 

«03  BANK  OF  COLUMBIA  v.  LAWRI^rvCE.  1  Pet  578;  Bank  of  U.  S.  v. 
Norwood.  1  Har.  &  J.  (Md.)  423;  Gist  v.  Lybrand,  3  Ohio,  307;  Jones  v. 
Lewis,  8  Watts  &  S.  14;    Walker  v.  Bank  of  Missouri,  8  Mo.  704. 

204  Bowling  V.  Harrison,  6  How.  248;  Williams  v.  Bank  of  U.  S.,  2  Pet. 
96;  Boyd  v.  City  Sav.  Bank,  15  Grat.  501;   Peirce  v.  Pendar,  5  Mete.  (Mass.) 


§§  145-14  6)  NOTICE   OF   DISHONOR.  387 

else  be  made  hy  leaving  at  his  place  of  domicile  or  of  business.^"" 
But,  as  an  exception  to  the  foregoing  rule,  the  notice  may  be  served 
by  mail  in  the  following  instances: 

(a)  If  the  holder  can  prove  that  the  party  to  be  charged  received 
the  notice  in  due  time.^°" 

(b)  If  the  instrument  is  protested  by  a  notary  at  a  place  different 
from  that  of  the  party's  place  of  residence.'*"'^ 

(c)  In  large  towns  and  cities,  where  letter  carriers  are  employed 
to  deliver  letters,  at  the  residences  or  places  of  business  of  parties 
who  usually  receive  their  letters  through  their  hands,  provided  the 
notice  be  mailed  early  enough  to  reach  the  drawer  or  indorser  in  due 
time.2°8 

(d)  If  there  are  several  post  oflSces  in  the  same  town,  between 
n^hich  there  is  a  regular  communication  by  mail.^°' 

(e)  If  it  is  the  certain,  clear,  definite  custom  of  a  bank,  in  giving 
notice,  to  serve  notices  by  mail,  and  this  is  known  to  the  party.^^" 

(2)  If  the  parties  reside  in  different  places,  or  the  drawer  or  in- 
dorser sought  to  be  charged  resides  at  a  place  other  than  that  at 

352;  John  v.  City  Nat.  Bank,  62  Ala.  529;  Vance  v.  Collins,  6  Cal.  435; 
Davis  V.   Gowen,  19  Me.  447. 

20B  Ireland  v.  Kip,  10  Johns.  491;  Bank  of  Columbia  v.  Lawrence,  1  Pet. 
578;  Sanderson  v.  Reinstadler,  31  Mo.  483;  Nevius  v.  Bank,  10  Mich.  547; 
Grinman  v.  Walker,  9  Iowa,  426.  "It  Is  well  settled  that,  when  the  indorser 
resides  at  the  place  of  the  presentment  and  dishonor  of  the  note,  the  notice 
must  be  served  on  him  personally,  or,  what  is  deemed  equivalent,  must  be 
left  at  his  dwelling  or  place  of  business."  Comstock,  J.,  In  VAN  VECHTEN 
V.   PRYN,   13  N.   Y.   549. 

«06  Cabot  Bank  v.  Warner,  10  Allen,  524;  Peabody  Ins.  Co.  v.  Wilson,  29 
W.  Va.  547.  2  S.  B.  888;    Phelps  v.  Stocking,  21  Neb.  443,  32  N.  W.  217. 

207  Hartford  Bank  v.  Stedman,  3  Conn.  489;  Warren  v.  Gilman,  17  Me. 
360;    Eagle  Bank  v.  Hathaway,  5  Mete.  (Mass.)  212. 

208  Shoemaker  v.  Mechanics'  Bank,  59  Pa.  St.  83;  Walters  v.  Brown,  15 
Md.  202;  Dobree  v.  Eastwood,  3  Car.  &  P.  250;  SMITH  v.  MULLKTT,  2 
Camp.  208.  Not  unless  addressed  to  street  and  number.  Benedict  v. 
Schmieg,  13  Wash.  470,  43  Pac.  374. 

209  SIIAYLOR  V.  MIX,  4  Allen  (Mass.)  351;  Curtis  v.  Bank,  6  Blackf. 
(Ind.)  312;  Brlndley  v.  Barr,  3  Har.  (Del.)  419;  Gist  v.  Lybrand,  3  Ohio,  307: 
Bell  V.  Hagerstown  Bank,  7  Gill,  216. 

210  Thorn  v.  Rice,  15  Me.  2G3;  Bowling  T.  Harrison,  6  How.  248;  Caroliua 
Nat  Bank  y.  Wallace,  13  S.  G.  347. 


388  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  (Ch.    9 

wliicli  the  instrument  is  payable,"^  the  holder  may  make  service  by 
depositing  the  notice  in  the  post  office,-^^  inclosed  in  a  securely 
closed  post-i)aid  wrapper,  and  addressed  to  the  i)OSt  otlBce  at  or  near- 
est to  the  party's  place  of  residence,  unless  he  is  accustomed  to  re- 
ceive his  letters  at  another  post  oflSce,  in  which  case  it  should  be 
directed  thereto.*^'  The  following  are  the  specific  rules  as  to  the 
address: 

(a)  If  the  residence  of  such  person  is  in  a  city  or  large  town,  it  is 
probably  sufficient  to  address  to  the  city  generally,  and  by  his  full 
name,  unless  it  appears  that  the  name  is  a  common  one  in  that  city 
or  town.'^* 

«ii  See  the  case  of  CHOUTEAU  v.  WEBSTER,  6  Mete.  (Mass.)  1,  In  which 
a  citizen  of  Boston  indorsed  a  note  payable  at  a  New  York  bank,  which 
the  maker  did  not  pay  at  maturity.  The  indorser  was  at  the  time  in  Wash- 
ington, as  a  senator,  and  notice  of  non-paj-ment  was  mailed  in  due  time  at 
New  York,  addressed  to  him  at  Washington.  The  indorser  had  a  business 
agent  in  Boston,  but  the  holder  was  ignorant  of  the  fact.  The  notice  was 
held  sufficient.  Depositing  in  any  letter  box  in  charge  of  the  post-othce  de- 
partment Is  sufficient.  Johnson  v.  Brown,  154  Mass.  105,  27  N.  E.  994; 
Casco  Nat  Bank  v.  Shaw,  79  Me.  376,  10  Atl.  G7;  Wood  v.  Callaghan,  61 
Mich.  402,  28  N.  W.   102.     See  Neg.  Inst.  L.  §  177. 

212  BUSSARD  V.  LEVERING,  6  Wheat.  102;  Munn  v.  Baldwin,  6  Mass. 
316;  Miller  v.  Ilackley,  5  .Johns.  (N.  Y.)  375;  Friend  v.  Wilkinson,  9  Grat. 
(Va.)  31;  SAUNDEHSON  v.  JUDGE,  2  H.  Bl.  510;  Phelps  v.  Stocking,  21 
Neb.  443.  32  N.  W.  217;    Wooley  v.  Lyon,  117  111.  244,  6  N.  E.  885. 

213  BA.\K  OF  COLUMBIA  v.  LAWRENCE,  1  Bet.  582;  MERCER  v.  LAN- 
CASTER, 5  Pa.  St.  1(K).  In  this  case  it  was  held  that  a  notice  of  dishonor 
was  sufficient,  If  addressed  to  an  indorser  at  the  postoffice  where  he  is  in 
the  haibt  of  receiving  his  mail,  although  such  office  is  not  nearest  to  his 
residence.  Citizens'  Nat.  Bank  v.  Cade,  73  Mich.  449,  41  N.  E.  500;  North- 
western Coal  Co.  V.  Bowman,  69  Iowa,  150,  28  N.  W.  496.  Where  there  are 
two  postoffices  in  the  town  where  the  indorser  resides,  it  will  be  sufficient, 
prima  facie,  If  notice  be  addressed  to  him  at  the  town  generally.  This 
may,  however,  be  rebutted  by  proof  of  the  indorser's  custom  of  receiving  his 
letters  at  one  office,  and  by  proof  that  the  holder  might,  by  reasonable 
diligence,  have  ascertained  this.  MORTON  v.  WESTCOIT,  8  Cush.  (Mass.) 
425. 

21*  True  V.  Collins.  3  Allen,  440;  Morse  v.  Chamberlin,  144  Mass.  406,  11 
N.  E.  560;  Riggs  v.  Hatch,  16  Fed.  840.  This  doctrine  is  disputed.  WALTER 
y.  HAYNES,  Ryan  &  M.  149.  In  this  case  it  was  held  that  a  letter  directed, 
"Mr.  Haynes,  Bristol,"  containing  notice  of  the  dishonor  of  a  bill,  was  proved 


§§  145-146)  NOTICE  OF  DISHo^•oR.  389 

(b)  If  the  party  live  at  one  place  and  receive  his  letters  at  an- 
other post  office,  notice  may  be  sent  to  either.^^" 

(c)  Mailing  to  any  address  given  by  the  drawer  or  indorser  for 
that  purpose  will  be  sufficient. ^^' 

(d)  If  the  party  to  be  charged,  unknown  to  the  holder,  changes 
his  place  of  residence  after  drawing  or  indorsing  the  bill  or  note, 
the  holder  may  nevertheless  still  address  the  notice  to  his  former 
place  of  residence,  provided  he  in  good  faith  supposed  he  was  ad- 
dressing it  to  the  actual  place  of  residence  of  such  party.**' 

to  have  been  put  In  the  postoffice.  It  was  held  that  this  was  not  sufficient 
proof  of  notice,  the  direction  being  too  general  to  raise  a  presumption  that 
tha  letter  reached  the  particular  individual  charged.  See,  however,  MANN 
V.    MOORS,    Ryan    &    M.    249. 

2i5Banlj  of  U.  S.  v.  Carneal,  2  Pet.  549;  Williams  v.  Bank  of  U.  S.,  Id, 
9Q.  If  sojoirning  in  another  place,  notice  may  be  sent  there.  CHOUTEAU 
V.  WEBSTFR,  6  Mete.  (Mass.)  1;  BANK  OF  COMMERCE  v.  CHAMBERS, 
14  Mo.  App.  152.     See  Neg.  Inst.  L.  §  179,  subd.  3. 

2ie  Importers'  &  Traders'  Nat.  Bank  v.  Shaw,  144  Mass.  424,  11  N.  E.  666; 
Bank  of  America  v.  Shaw,  142  Mass.  291,  7  N.  E.  779.  As  where  an  address 
is  added  to  the  signature.  Burmester  v.  Barron,  17  Q.  B.  828;  Morris  v. 
Husson,  4  Sandf.  (N.  Y.)  93.  It  has  been  held  that  In  such  case  notice  must 
be  sent  to  that  address.  BARTLETT  v.  ROBINSON,  39  N.  Y.  187.  Such 
is  the  provision  of  Neg.   Inst.  L.  §  179. 

217  See  Munn  v.  Baldwin,  6  Mass.  316;  Requa  v.  Collins,  51  N.  Y.  148; 
Ward  V.  Perrin,  54  Barb.  89.  In  BERRIDGB  v.  FITZGERALD,  L.  R.  4  Q.  B. 
639,  a  bill  was  shown  to  have  been  drawn  on  a  company,  and  accepted 
by  the  manager.  The  defendant  and  another  director  indorsed.  At  maturity 
the  bill  was  not  paid,  as  the  affairs  of  the  company  were  being  wound  up. 
The  plaintiff  did  not  know  the  defendant's  place  of  residence,  so  he  sent 
the  notice  to  him  at  the  company's  office.  The  defendant  had  for  some 
time  ceased  to  come  there,  since  the  company  had  become  embarrassed. 
The  notice  was  held  to  be  good  under  the  circumstances.  In  the  case  of 
RAWDON  V.  REDFIELD,  4  Sandf.  (N.  Y.)  178,  it  was  shown  that  at  the 
date  of  the  note  the  indorser  lived  in  Troy,  but  before  maturity  of  the  note 
he  moved  to  New  York.  His  name  was  not  in  the  directory,  however,  and 
the  notary  who  protested  the  bill  in  New  York,  being  Informed  by  the  holder 
and  acceptor,  that  Troy  was  the  place  of  residence  of  the  indorser,  mailed 
him  a  notice  to  that  place.  This  was  held  to  be  sufficient  notice.  In  the 
case  of  BEALE  v,  PARRISH,  20  N.  Y.  407,  411.  It  was  held  by  Grover,  J., 
that  "inability  to  discover  the  residence  of  the  indorser  excuses  the  proper 
service  only  so  long  as  such  inability  continues." 


390  PRESKNTMENT    AND    NOTICE    OK    Dli^HONOB.  (Ch,   9 

Time  of  Giving  Notice. 

The  third  element  of  process  relates  to  the  time  at  which  notice 
is  given.  Notice  of  dishonor  cannot  be  given  before  actual  dis- 
honor of  the  instrument  takes  place.'^'  This  is  because  the  law 
merrhant  insists  upon  a  legal  presentment  and  an  actual  dishonor 
before  it  fixes  the  liability  upon  the  indorser.  Without  these  the 
notice  of  dishonor  is  a  meaningless  form.  The  fact  that  the  bill  is 
unpaid  is  immaterial.  It  must  be  dishonored  before  the  indorser 
can  be  liable,  and  hence  prerequisites  to  the  issuing  of  the  notice 
are  the  legal  formalities  necessary  to  create  a  dishonor.^^*  But, 
the  dishonor  being  once  fixed,  the  holder  has  a  reasonable  time  to 
take  steps  to  fix  the  liability  of  the  parties  responsible  over  to  him 
ujjon  the  bill  or  note.  The  meaning  of  this  term  "reasonable  time" 
has  become  established  by  universal  usage.  He  may,  it  is  true, 
give  notice  at  once,^^°  but  all  that  is  required  of  him  is  reasonable 
diligence.  Eeasonable  diligence  is  regulated  by  practical  conven- 
ience and  the  usual  course  of  business.  Between  parties  living  in 
the  same  place,  the  holder  has  until  the  expiration  of  the  following 
business  day  to  give  notice.  He  may  give  it  within  banking  hours 
at  the  bank,  within  business  hours  at  the  countinghouse  or  place  of 
business,^^^  and  within  the  hours  of  rest  at  the  dwelling  place.^^^ 
Between  parties  living  in  different  places,  the  notice  must  be  put 
into  the  post  oflSce  in  time  to  go  by  a  mail  of  the  day  next  succeed- 
ing the  last  day  of  grace,  or  the  first  possible  or  practicable  mail 
after  the  day  of  maturity.^^'     The  rule  at  first  required  that  notice 

«i 8  Jackson  v.  Richards,  2  Caines,  343. 

219  Nicholson  v.  Gouthit,  2  H.  Bl.  609;   Jackson  v.  Richards,  2  Caines,  343. 

220  Ex  parte  MOLINE,  19  Ves.  21G:  Bauk  of  Alexandria  v.  Swaun.  9  Pet. 
33;   LIXDEXBERGER  v.  BEALI^  6  Wheat.  104.     See  Xeg.  Inst.  L.  §  173. 

221  ALLEN  V.  EDMOXSON,  2  Car.  &  K.  547;  Adams  v.  Wright,  14  Wis. 
408;  GARXETT  v,  W^OODCOCK,  6  Maule  &  S.  44;  PARKER  v.  GORDON, 
7  East,  385.     See  Neg.  Inst.  L.  §  174.     Ante,  p.  —  . 

222  In  the  case  of  JAMESON  v.  SWINTON,  2  Taunt.  224,  the  bill  was 
shown  to  have  been  dishonored  on  July  10th.  At  4  o'clock  p.  m.  of  the  same 
day  notice  was  given  to  the  last  indorser.  At  8  or  9  o'clock  on  the  night 
of  the  11th  this  last  indorser  gave  the  defendant  notice.  It  was  held  that 
the  last  Indorser  gave  notice  soon  enough  to  entitle  him  to  recover  against 
the   defendant. 

223  TIXDAL  V.  BROWN,  1  Term  R.  167;  Darbishire  v.  Parker,  6  East, 
3;    Lenox  v.  Roberts,  2  Wheat.  373;    STAINBACK  v.  BANK  OF  VIRGINIA, 


§§  145-146)  KOTICE    OF    DISHONOR.  391 

of  the  default  of  the  maker  or  acceptor  should  be  put  into  the  post 
ofBce  early  enough  to  be  sent  by  the  mail  of  the  day  next  succeed- 
ing the  last  day  of  grace.^^*  But  it  often  happened  that  the  mail  of 
the  day  succeeding  the  day  of  default  went  out  at  unreasonable 
hours,  or  before  a  reasonable  time  could  be  had  for  depositing  the 
notice,  as,  for  example,  soon  after  midnight,  or  at  a  very  early  hour 
in  the  morning,^^"  and  in  such  cases  was  sometimes  made  up  and 
closed  the  evening  preceding.  For  this  reason  the  rule  universally 
adopted  has  been  that  the  notice,  in  order  to  charge  the  drawer  or 
indorser,  must  be  deposited  in  the  post  office  in  time  to  be  sent  by 
mail  of  the  day  succeeding  the  day  of  the  dishonor,  provided  the 
mail  of  that  day  be  not  closed  at  an  unreasonable  hour,  or  before 
early  and  convenient  business  hours.^^"     In  case  of  indorsers,  each 

11  Grat  (Va.)  260.  As  holding  that  a  letter  received  on  Sunday  need  not 
be  opened  till  Monday,  so  that  notice  of  dishonor  will  be  held  to  have  been 
received  on  that  day,  and  that  transmitting  such  notice  by  next  day's  post 
is  sufficient  diligence,  see  2  Barn.  &  Aid.  501,  note  a.  In  Gladwell  v.  rurner, 
L.  R.  5  Exch.  59,  all  the  parties  to  the  bill  were  shown  to  reside  in  London. 
On  the  morning  after  the  dishonor  of  the  bill,  the  plaintiff,  who  did  not 
know  the  residence  of  the  defendant  (the  drawer),  applied  to  S.  for  informa- 
tion. The  latter  was  not  at  home,  and  the  plaintiff  did  not  obtain  his 
information  until  5:30  p.  m.  of  the  same  day.  He  posted  his  notice  of  dis- 
honor after  6  p.  m.,  and  it  was  not  received  that  night.  It  was  held  that, 
under  the  circumstances,  the  notice  was  not  too  late.  See  Neg.  Inst.  L. 
§§    175,    176. 

224  Bank  of  Alexandria  v.  Swann,  9  Pet.  33. 

22B  GEILL  V.  JEREMY,  Moody  &  M.  61.  In  this  case,  it  was  held  that  a 
party  receiving  notice  of  dishonor  of  a  bill  of  exchange  need  not  give  notice 
to  the  party  above  him  till  the  next  post  after  the  day  on  which  he  himself 
receives  the  notice,  although  he  might  easily  give  it  that  day,  and  there 
is  no  post  on  the  following  day.  Mitchell  v.  Cross,  2  R.  L  437;  West  v. 
Brown,  6  Ohio  St.  542;    Chick  v.  Pillsbury,  24  Me.  458. 

228  Fullerton  v.  Bank  of  U.  S.,  1  Pet.  605-608;  Eagle  Bank  v.  Cliapin,  3 
Pick.  180;  Talbot  v.  Clark,  8  Pick.  51;  Carter  v.  Burley,  9  N.  II.  55!)-570; 
Farmers'  Bank  of  Maryland  v.  Duvall,  7  Gill  &  J.  79;  Freeman's  Bank  v. 
Perkins,  18  Me.  292;  Mead  v.  Engs.  5  Cow.  303;  Sewall  v.  Russell,  3  Wend. 
276;  Brown  v.  Ferguson,  4  Leigh,  37;  Dodge  v.  Bank  of  Kentucky,  2  A. 
K.  Marsh.  610;  Hickman  v.  Ryan,  5  Litt.  24;  Hartford  Bank  v.  Stednian, 
3  Conn.  489;  BREXZER  v.  WIGHTMAN,  7  Watts  &  S.  (Pa.)  264.  Tlie  party 
notifying  is  not  bound  to  send  the  notice  by  mall,  but,  if  he  chooses  other 
means  of  conveyance,  the  notice  must  be  given  within  the  time  within 
which  it  would  have  been  received  iu  due  course  of  mail.     Daibishlre   v. 


3'J2  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  (Cll.    'J 

party  to  a  bill  or  note  has  the  same  time  after  receipt  of  notice,  for 
givin<^  notice  to  other  parties,  that  was  allowed  to  the  holder  after 
default,  and  the  time  in  regard  to  them  is  governed  by  the  princi- 
ples we  have  just  stated.^^^  This  rule,"  however,  has  its  limitations. 
If  the  holder  of  a  bill  of  exchange  or  promissory  note  wishes  to  avail 
himself  of  a  notice  of  dishonor  given  by  him  to  a  remote  indorser, 
he  must  give  it  within  the  time  within  which  he  is  by  law  required 
to  give  it  to  his  immediate  indorser.  And  he  cannot  avail  himself 
of  his  laches  to  gain  another  day.^^^  If  he  could,  the  consequence 
which  has  alread}'  been  pointed  out  would  follow,  namely,  that,  if 
there  were  twenty  indorsers,  he  would  have  twenty  days  within 
w'hich  to  give  notice  to  the  first  of  them.  The  holder  has  his  day  to 
give  notice  to  any  party  he  may  seek  to  charge,  and  each  of  the 
prior  indorsers  in  turn  has  his  day.  Each  has  one  day  to  give  notice 
to  all  parties  against  whom  he  intends  to  enforce  his  remedy.^^' 

rarker,  6  East,  3;  BANK  OF  COLUMBIA  v.  LAWRENCE,  1  Tet.  578;  JAR- 
VIS  V.  MANUFACTURING  CO.,  23  Me.  287.    See  Neg.  Inst.  L.  §  175,  subd.  2. 

227  SHELDON  v.  BENHAM,  4  Hill  (N.  Y.)  129;    HOWARD  v.  IVES,  1  Hill 
(N.   Y.)   203;    I^WSON  v.  FARMERS'  BANK,  1  Ohio   St.   206,   Johns.   Cas. 

Bills  &  N.  203:  SHELEURNE  FALLS  NAT.  BANK  v.  TOWNSLEY,  102  Mass. 
177;  SIMPSON  v.  TURNEY,  5  Humph.  (Tenn.)  419;  SEATON  v.  SCOVILL, 
18  Kan.  435;  BRAY  v.  HAD  WEN,  5  Maule  &  S.  C8.  See  Neg.  Inst.  L.  § 
178.     Cf.  §  1G5. 

228  Brown  v.  Ferguson,  4  Leigh  (Va.)  37;  TURNER  v.  LEECH,  4  Barn. 
&  Aid.  451.  In  this  case,  Abbott,  C.  J.,  said:  "The  plaintiff,  who  ought 
to  have  received  notice  of  the  dishonor  of  the  bill  of  exchange  from  B. 
on  the  5th  September,  did  not,  in  fact,  receive  notice  till  the  8th,  and  there- 
fore he  was  clearly  discharged  by  the  laches  of  the  holder.  Then  can  he, 
by  paying  the  bill,  place  the  prior  indorsers  in  a  worse  situation  than  that 
in  which  they  would  otherwise  have  been?  I  think  he  cannot  do  so;  and 
that,  in  paying  this  bill,  he  has  paid  it  in  his  own  wrong,  and  cannot  be 
allowed  to  recover  upon  it  against  the  defendant."  Kennedy  v.  Geddes,  8 
Port  (Ala.)  2G3;  Stix  v.  Mathews,  63  Mo.  371;  Carter  v.  Burley,  9  N.  H. 
558.  It  was  decided  in  the  case  of  FITCHBURG  BANK  v.  PP]RLEY,  2 
Allen,  433,  that  an  indorser  of  a  dishonored  note  will  be  rendered  liable 
to  a  subsequent  indorser,  if  such  indorser,  having  received  a  duplicate 
notice  from  notary  of  holder,  for  the  prior  indorser,  mailed  it,  with  the 
proper  address,  on  the  day  of  its  receipt,  although  it  did  not  reach  its  destina- 
tion as  soon  as  if  it  had  been  sent  by  the  holder  or  notary. 

220  In  an  action  by  the  fourth  against  the  first  indorsee  of  a  note,  all  the 
parties  to  which  resided  in  Loudon,  it  was  shown  that  the  plaintilf  received 


§§  145-146)  NOTICE    OF    DISHONOR.  393 

The  holder  may  avail  himself  of  a  notice  duly  given  by  any  other 
party  to  a  bill,  but  this  notice  must  be  given  in  due  time  by  the  par- 
ty to  the  bill,  by  which  is  meant  due  time  if  he  himself  were  serv- 
ing."° 

notice  of  dishonor  from  his  indorsee  on  the  20th,  and  gave  notice  to  his  im- 
mediate indorser  by  a  letter  mailed  on  the  evening  of  the  21st,  but  so  late 
that  it  was  not  delivered  until  next  morning.  This  was  held  to  be  such 
laches  as  to  discharge  all  prior  indorsers,  though,  in  the  course  of  the  22d, 
notice  was  given  to  second  indorsee  and  to  defendant.  SMITH  v.  MUL- 
LETT,  2  Camp.  208.  In  the  case  of  HOWARD  v.  I\'EiS,  1  Hill  (N.  Y.)  263, 
It  was  held  that  "the  next  day"  is  to  be  construed  as  meaning  the  next 
business  day,  so  that,  in  case  of  protest  on  Saturday,  notice  will  be  in  time  if 
mailed  on  the  following  Monday.  The  indorsee  of  a  bill  of  exchange  left 
it  with  his  bankers,  who  presented  it  for  payment  on  the  4th,  when  it 
was  dishonored,  and  on  the  5th  they  returned  it  to  the  Indorsee,  who  gave 
notice  of  the  dishonor  to  the  drawer,  on  the  6th,  by  post.  Such  notice  was 
held  to  be  reasonable.    SCOTT  v.  LUFFORD,  9  East,  347. 

a 80  ROWE  V.  TIPPER,  13  C.  B.  249;   Dobree  v.  Eastwood,  3  Car.  &  P.  250. 


394  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  (Ch.   9 

EXCUSES  FOR  FAILURE  TO  PRESENT  OR  GIVE  NOTICE. 

147.  Presentment  and  notice  of  dishonor  are  dispensed 
■with  in  the  case  of  a  drawer  or  indorser  -whose  duty  it  is, 
as  between  himself  and  the  prior  parties  to  the  instru- 
ment, to  pay  it  at  maturity.^' 

147a.  Presentment  is  dispensed  -with  w^hen,  after  the 
exercise  of  reasonable  diligence,  it  cannot  be  made;  and 
notice  of  dishonor  is  dispensed  with  w^hen,  after  the  exer- 
cise of  reasonable  diligence,  it  cannot  be  given,  or  does 
not  reach  the  parties  to  be  charged. 

147b.  Presentment  and  notice  of  dishonor  may  be  dis- 
pensed w^ith  by  waiver,  express  or  implied. 

The  foregoing  are  common  instances  among  the  many  in  which 
presentment  and  notice  of  dishonor  are  dispensed  with.  They  rest 
upon  somewhat  different  reasons,  which  it  is  our  purpose  to  explain. 

Where  the  drawer,  through  his  own  fault,  has  no  reason  to  ex- 
pect the  bill  will  be  paid,  it  is  unjust  to  cast  upon  the  holder  the 
duty  of  presentment  and  notice.^^^  These  are  steps  taken  to  fix 
the  drawer's  liability,  and  need  only  be  taken  when  the  bill  was 
given  in  good  faith,  and  after  proper  provision  for  its  acceptance 

281  2  Ames,  Cas.  Bills  &  N.  813. 

232  TERRY  V.  PARKER,  6  Adol.  &  E.  502.  In  this  case  It  was  held  that  If 
the  drawer  of  a  bill  of  exchange  have  no  effects  in  the  hands  of  the  drawee 
at  the  time  of  drawing  the  bill,  and  of  its  maturity,  and  have  no  ground  to 
expect  that  It  will  be  paid,  it  is  not  necessary  to  present  the  bill  at  maturity; 
and  if  it  be  presented  two  days  after,  and  payment  be  refused,  the  drawer  is 
liable.  Mobley  v.  Clark,  28  Barb.  (N.  Y.)  390;  Kinsley  v.  Robinson,  21  Pick. 
(Mass.)  327;  CAUNT  v.  THOMPSON,  7  C.  B.  400.  "The  law  requires  notice 
to  be  given  for  this  reason,  because  It  is  presumed  that  the  bill  is  drawn  on 
account  of  the  drawee's  having  effects  of  the  drawer  In  his  hands;  and,  if 
the  latter  has  notice  that  the  bill  is  not  accepted  or  not  paid,  he  may  withdraw 
them  immediately.  But,  if  he  has  no  effects  In  the  other's  hands,  then  he 
cannot  be  injured  for  want  of  notice."  Buller,  J.,  in  BICKERDIKE  v.  BOLL- 
MAN,  1  Term  R.  405.  For  a  holding  to  the  same  effect,  by  the  same  judge, 
see  Corney  v.  Da  Costa,  1  Esp.  .302.  See,  also,  DENNIS  v.  MORRICE,  3  Esp. 
158;  Sands  v.  Clarke,  8  C.  B.  751. 


§§  147-147b)     EXCUSES  for  failure  to  present  or  give  notice.      395 

or  payment  had  been  made  on  the  drawer's  part.  He  has  made  a 
contract  with  the  holder,  one  element  of  which  was  that  the  drawee 
would  honor  his  bill  when  presented.  And,  if  it  can  be  shown  that 
there  could  have  been  no  reasonable  expectation  of  this,  the  drawer 
can  suffer  no  loss  or  injury  from  the  failure  of  the  holder  to  make 
a  presentment  to  the  drawee  which  would  be  fruitless  if  made. 
Notice  of  dishonor  as  to  him  would  be  an  empty  form,  which  the 
law  will  not  require  at  the  hands  of  the  holder.  But  these  reasons 
do  not  apply  to  excuse  presentment  and  notice  as  to  the  indorsers, 
unless  the  indorsers  have  indorsed  for  the  accommodation  of  the 
drawer,  with  knowledge  of  the  fact  that  the  drawer  has  no  right  to 
expect  acceptance  or  payment.^^'  For  if  the  indorsers  know  noth- 
ing of  the  relation  between  the  drawer  and  drawee,  they  may  re- 
quire presentment  and  notice,  although  the  drawer  cannot.^^*  A 
drawer  or  indorser  who  is  the  accommodating  party  may  insist  upon 
presentment  and  notice;  ^^^  but  not  if  he  is  the  accommodated  par- 
ty, inasmuch  as  he  then  can  have  no  recourse  against  the  acceptor 
or  maker.^^* 

Presentment  and  notice  are  not  dispensed  with  where  the  drawee, 
though  he  has  no  funds  of  the  drawer  in  his  hands,  has  promised  to 
accept  the  bill  for  the  drawer's  accommodation,^'^  nor  because  the 

238  French  v.  Bank  of  Columbia,  4  Cranch,  141;  LEACH  y.  HEWITT,  4 
Taunt.  731, 

284  Carter  v.  Flower,  16  Mees.  &  W.  743;  Brown  v.  Maflfey.  15  East.  216; 
Bogy  V.  Keil,  1  Mo.  743;  Warder  v.  Tucker,  7  Mass.  449;  Rea  v.  Dorrance, 
18  Me.  137.  In  the  case  of  TURNER  v.  SAMSON,  2  Q.  B.  Div.  23,  Mellish, 
L.  J.,  said:  "It  appears  beyond  all  doubt  that  the  bill  was  an  accommodation 
bill,  and  that  the  drawer  and  the  other  defendants,  as  indorsers,  all  signed  the 
bill  for  the  accommodation  of  S.  The  question  is,  in  substance,  whether  the 
defendant  (the  appellant)  was  entitled  to  notice.  He  was  plainly  not  the  per- 
son who  was  to  take  up  the  bill,  and  he  had  a  right  to  suppose  that  another 
person  would  see  that  it  was  taken  up.  It  appears  to  me  that  the  defendant 
was  in  the  same  position  as  if  the  acceptor  had  been  the  person  who  was 
ultimately  liable  to  pay." 

28  8  Cory  V.  .Scott,  3  Bam.  &  Aid.  619;  TURNER  v.  SAMSON,  2  Q.  B.  Div. 
23;   Miser  v.  Trovinger,  7  Ohio  St.  281. 

236  Ex  parte  Heath,  2  Ves.  &  B.  240;  Miser  v.  Trovinger,  7  Ohio  St.  281- 
Rhett  V.  Poe,  2  How,  457;  AMERICAN  NAT.  BANK  v.  MANUFACTURING 
CO.,  04  Tenn.  624.  :^)  S.  W.  7.13.     See  Neg.  Inst.  L.  §§  140,  186,  subd.  3. 

23T  Wahvyn  v,  St.  Quintin.  1  Bos.  &  P.  652;  Adams  v.  Darby,  28  Mo.  102; 
Oliver  v.  Buuk  of  'Iiuut-ssee,  11  IIuiiipli.  74. 


396  PRESENTMENT    AND    NdTlCI-:    OK    DISHONOR.  (Ch.   9 

drawer  has  consigned  property  to  the  drawee  which  he  draws 
against, ^^*  nor  because  there  is  a  running  account  between  him  and 
the  drawer,^*"  nor  in  anv  case  where  he  has  reason  to  exi)ect  his 
draft  would  be  honored-*"  The  test  to  be  applied  is  whether  the 
drawer  had  a  right  to  expect  or  require  that  the  drawee  would  honor 
his  bill.^*^  If  the  courts  can  construe  such  a  legal  right  or  just 
exi)ectation  on  his  part,  failure  to  present  the  bill,  and  give  him  no- 
tice of  its  dishonor,  discharges  him. 

««8  DICKINS  V,  BEAL,  10  Pot.  572;  Grosvenor  v.  Stone,  8  Pick.  (Mnss.)  79. 
«3o  In  tUe  case  of  HAMMOND  v.  DUFREXE,  3  Camp.  145,  Lord  Ellen- 
borough  said:  "I  conceive  the  whole  period  must  be  looked  to  from  the  draw- 
ing of  the  bill  till  It  becomes  due,  and  that  notice  is  requisite  If  the  drawer 
has  efifects  in  the  hands  of  the  drawee  at  any  time  during  that  interval."  In 
THACKKAY  v.  BLACKEIT,  Id.  1G4,  it  was  shown  that  after  acceptance  and 
indorsement,  and  before  maturity,  certain  bills  drawn  on  P.  &  S.  were  de- 
stroyed by  mistake  while  in  the  hands  of  the  acceptor.  This  fact  was  made 
known  to  the  defendant  (the  drawer),  and  he  was  requested  to  give  other  bills. 
He  refused,  and  afterwards  P.  &  S.  failed.  No  notice  was  given  the  defend- 
ant of  dishonor,  though  the  bills  were  presented  on  maturity.  Lord  Ellen- 
borough  held  that  "it  is  well  settled  that  insolvency  or  bankruptcy  of  the  ac- 
ceptor does  not  dispense  with  due  notice  of  the  dishonor  of  the  bill  being  given 
to  the  drawer.  Then  does  it  make  any  difference  that  the  bills  were  destroyed 
before  they  came  due?  I  think  not;  for  they  might  still  have  been  paid  with 
or  without  an  indemnity,  and  the  defendant,  not  hearing  that  they  were  dis- 
honored, might  have  been  prevented  from  pressing  his  remedy  against  the 
acceptors.  •  •  *  If  there  was  an  open  account  between  the  parties,  and 
the  acceptors  were  indebted  in  any  sum  to  the  drawer  before  the  bills  became 
due,  I  cannot  say  that  he  must  necessarily  have  been  aware  beforehand  that 
either  of  them  would  be  dishonored."  See,  also,  DONNELLY  v.  HOWIE, 
Hayes  &  J.  436. 

240TIIACKRAY  v.  BLACKETT,  3  Camp.  1G4;  LEGGE  v.  THORPE,  12 
East.  171.  Thus,  in  the  case  of  BLACKHAN  v.  DOREN,  2  Camp.  503.  it  was 
held  that  if  the  drawer  of  a  bill  of  exchange,  when  presented  for  acceptance, 
baa  effects  In  the  hands  of  the  drawees,  though  he  Is  indebted  to  them  for  a 
much  larger  amount,  and  they,  without  his  knowledge,  have  appropriated 
these  effects  to  the  satisfaction  of  the  debt,  he  is  entitled  to  notice  of  dishonor 
for  nonacceptance,  as  he  might  expect  under  these  circumstances  that  the  bill 
would  be  accepted  and  paid.  See,  also,  Carew  v.  Duckworth,  L.  R.  4  Exch. 
313;  Hopkirk  v.  Page,  2  Brock.  34,  Fed.  Cas.  No.  6,697;  CATHELL  v.  GOOD- 
WIN. 1  Har.  &  G.  (Md.)  4G8;  ROBINSON  v.  AMES,  20  Johns.  (N.  Y.)  146. 
241  See  Neg,  Inst  L.  §§  139,  1S5,  subd.  4. 


§§  147-147b)     EXCUSES  for  failure  to  present  or  give  notice.      397 

Thus  when  the  drawer  or  indorser  is  fully  secured,  and  has  prom- 
ised to  see  to  the  payment  of  the  paper,**^  there  is  no  reason  for  the 
enforcement  of  the  rule  requiring  presentment  and  notice  in  his  be- 
half. As  we  have  already  said,  one  of  the  principal  objects  of  no- 
tice is  to  enable  the  indorser  to  obtain  indemnity  from  the  princi- 
pal, and  this  has  already  in  such  case  been  attained.  But  the  mere 
precaution  by  an  indorser  of  taking  security  from  his  principal  does 
not  operate  as  a  dispensation  of  a  regular  demand  and  notice.  It 
has  been  held  that  an  assignment  to  the  drawer  or  indorser  of  all 
the  property  of  the  acceptor  or  maker  as  security  against  liability 
is  sufficient  to  dispense  with  presentment  and  notice.^*'  But  upon 
principle,  and  by  weight  of  authority,  even  this  is  not  enough  unless 
there  be  an  understanding,  express  or  implied,  between  the  parties, 
that  the  drawer  or  indorser  is  to  be  exclusively  liable  to  provide  for 
the  payment;  and  in  all  cases  the  proper  test  is  whether  the  drawer 
or  indorser  is  bound  to  take  up  the  paper.^** 

Presentment  and  notice  are  also  dispensed  with  when  the  drawer 
and  drawee  are  one  and  the  same  person,^*'*  and  consequently  when 
a  bill  is  drawn  by  a  partner  on  the  firm  in  the  firm  business,^**  and 
when  the  drawee  is  a  fictitious  person.^** 

Reasonable  Diligence. 

Presentment  may  be  dispensed  with  when,  after  the  exercise  of 
reasonable  diligence,  it  cannot  be  made;  and  notice  of  dishonor  is 
dispensed  with  when,  under  the  same  circumstances,  it  cannot  be 

242  Corney  v.  Da  Costa,  1  Esp.  302;  Bond  v.  Farnham,  5  Mass.  170;  Daniel, 
Neg.  Inst.  §§  1128-1143;   Tied.  Com.  Paper,  ?  3G2. 

243  Duvall  V.  Bank,  9  Gill  &  J.  (Md.)  31;  Spencer  v.  Harvey,  17  Wend. 
(N.  Y.)  4S9;   Daniel,  Neg.  In.st.  §§  1130-1132. 

244  MOSES  V.  ELA,  43  N.  H.  557;  Creamer  v.  Perry,  17  Pick.  (Mass.)  332; 
Haskell  v.  Eoardman,  8  Allen  (Mass.)  38;  WILSON  v.  SENIER.  14  Wis.  380; 
Ray  V.  Smith,  17  Wall.  416;    HULL  v.  MYERS,  90  Ga.  074,  16  S.  E.  653. 

248  As  to  notice.  Bailey  v.  Bank,  11  Fla.  2(;(>;  Raymond  v.  Mann.  45  Tex. 
301.  As  to  presentment.  Bailey  v.  Bank,  supra;  Manx  Ferry  Gravel  Road  Co.  v. 
Branegan,  40  Ind.  301.  But  as  to  presentment  tliis  Is  doubtful.  2  Ames,  Cas.  Bills 
&  N.  4<!2,  note  1;  Daniel,  Neg.  Inst.  §  1088a.     See  Neg.  Inst.  L.  §  185,  suhd.  1. 

248  rORTIIOUSE  V.  PARKER,  1  Camp.  82;  GOWAN  v.  .7ACKS0N,  20 
Johns.  (N.  Y.)  176;    Rhett  v.  Poo,  2  How.  457;   Daniel,  Nog.  Inst.  §  1086. 

247  Smith  V.  Bellamy,  2  Starkie,  223;  Chalm.  Bills  Exch.  (4th  Ed.)  150.  See 
Neg.  Inst.  L.  §§  142,  185.     Of.  sectioQ  186,  subd.  1;   section  245,  subd.  L 


398  PRESENTMENT    AND    NOTK  E    OK    DISHONOR.  (Ch.   9 

given,  or  does  not  reach  the  parties  sought  to  be  charged.'^**  It  is 
impossible  to  define  accurately  what  constitutes  reasonable  dili- 
gence, or  to  do  more  than  enumerate  some  of  the  instances  in  which 
I)i-eseutniont  and  notice  may  be  dispensed  with  under  this  general 
rule. 

\Var,-^°  disease,^""  the  suspension  of  commercial  intercourse  by 
supeiior  force,  such  as  the  public  and  positive  prohibition  of  com- 
merce, occupation  of  a  country  by  public  enemies,^"^  and  the  like, 
exonerate  the  holder  from  presentment  and  notice.  The  interest  of 
the  public  forbids  such  acts,  and  therefore  the  individual  cannot  be 
held  responsible  if  he  fail  to  perform  them.  Thus,  the  public  policy 
forbids  communication  with  districts  infected  by  such  plagues  as 
the  cholera  or  yellow  fever,  because  public  safety  requires  their 
quarantine.  Hence,  even  if  the  matter  be  not  regulated  by  express 
statute,  as  it  is  in  some  states,  the  doctrines  of  the  common  law  for- 
bid all  business  intercourse  with  the  inhabitants  of  such  districts. 
But  the  other  rule  of  the  common  law,  that  inability  to  perform  the 
terms  or  conditions  of  a  contract  by  reason  of  inevitable  accident  or 
casualty  constitutes  no  excuse  for  non-performance,  does  not  apply 
to  the  presentment  of  negotiable  instruments  and  notice  of  their  dis- 
honor, because  questions  of  presentment  and  notice  depend  upon 
due  diligence.  The  holder,  if  he  has  used  due  diligence  in  present- 
ing the  bill  or  note,  and  in  notifying  parties  of  its  dishonor,  has  done 
all  the  law  requires  of  him.^^^     Diligence  on  his  part  is  measured 

246  See  Neg.  Inst.  L.  §§  142,  183.  245. 

2*0  Seholefield  v.  P:ichelberger,  7  Pet.  586;  U.  S.  v.  Grossmayer,  9  Wall.  75; 
Berry  v.  Southern  Bank.  2  Duv.  (Ky.)  379;  JAMES  v,  WADE.  21  La.  Ann.  548 
(this  ease  holds  that  the  holder  of  commercial  paper  must  use  all  other  means 
possible  to  give  notice  to  the  party  to  be  charged  when  by  reason  of  circum- 
stances the  mail  cannot  be  used). 

250  Billgerry  v.  Branch,  19  Grat.  (Va.)  393;  MORGAN  v.  BANK  OF  LOUIS- 
VILLE, 4  Bush  (Ky.)  82;  Norris  v.  Despard.  38  Md.  491;  TUNNO  v. 
LEAGUE,  2  Johns.  Cas.  (Ky.)  1.  As  holding  that  the  illness  of  one's  wife  will 
not  excuse  delay  in  giving  notice  of  dishonor,  see  TUKNER  v.  LEACH,  Chit 
Bills  &  N.  (10th  Ed.)  332.  note  13. 

261  Polk  V.  Spinks,  5  Cold.  431;  Tardy  v.  Boyd,  26  Grat.  632. 

2S2  Due  diligence  thus  excuses  delay  as  well  as  entire  failure  to  present  or 
give  notice.  Windham  Bank  v.  Norton.  22  Conn.  213;  PATIENCE  ^. 
TOWNLEY,  2  J.  P.  Smith  (Eng.»  223;  PIER  v.  HEINRICHSHOFFEN,  67  Mo. 
163.     See  Neg.  lust.  L.  §§  141,  184.     Cf.  section  244. 


§§  147-147b)       EXCUSES  FOR  FAILURE  TO  PRESENT  OR  GIVE  NOTICE.        899 

by  the  general  convenience  of  tlie  commercial  world,  and  the  prac- 
ticability of  accomplishing  the  end  required  by  ordinary  skill,  cau- 
tion, and  effort.*"'  And  it  only  requires  that  demand  and  notice 
must  be  made  and  given  within  a  reasonable  time  after  the  impedi- 
ment is  removed.  This  rule  also  does  not  apply  to  indorsers.,  unless 
the  objection  applies  to  them.  For  example,  where  a  maker  or  ac- 
ceptor is  in  a  beleaguered  town,  and  so  inaccessible,  it  is  merely 
the  presentment  to  him  which  is  excused.  The  indorser's  liability 
should  be  at  once  fixed  by  sending  him  notice;  and,  if  the  indorser 
can  be  notified,  notice  to  him  is  not  excused,  for  the  law  merchant 
insists  on  compliance  with  its  formalities  as  far  as  they  can  be  ob- 
served.*"* 

In  cases  of  absence,  death,  or  inability  to  discover  the  residence 
of  the  maker  or  acceptor,  the  question  is  one  of  diligence.*""  When 
the  maker  of  a  note  or  acceptor  of  a  bill  has  absconded,  that  will 
ordinarily  excuse  a  demand,  and  notice  of  the  fact  is  sufficient  to 
hold  all  the  indorsers.*""  Where  the  maker  or  acceptor  is  a  sea- 
man on  a  voyage,  having  no  domicile,  the  indorser  is  liable  without 
a  demand  being  made;*"^  and  in  every  case  where  the  maker  or 
acceptor  has  no  known  place  of  residence,  or  place  at  which  the 
note  can  be  presented,  the  holder  will  in  like  manner  be  excused 
from  making  any  demand  whatever.*"*  The  commonest  instance  of 
this  last  general  statement  is  where  the  maker  or  acceptor  removes 
from  the  state,  and  continues  to  reside  abroad  until  its  maturity. 

208  Windham  Bank  v.  Norton,  22  Conn.  213;  PATIENCE  v.  TOV^'NLEY, 
2  J.  P.  Smith  (Eng.)  223;  Farmers'  Bank  v.  Gunnell,  26  Grat.  (Va.)  131; 
SCHOFIELD  V.  BAYARD.  3  Wend.  (N.  Y.)  488. 

254  Foster  v.  Julien,  24  N.  Y.  28;  Spies  v.  Gilmore,  1  N.  Y.  321;  McGRUDER 
V.  BANK  OF  WASHINGTON,  9  Wheat.  598.  In  this  case,  it  was  held  tliat  a 
removal  to  another  state  by  the  maker  excuses  actual  demand.  Juniata  Bank 
V.  Hale,  IG  Serg.  &  R.  157;   Gibbs  v.  Cannon,  9  Serg.  &  R.  201. 

206  If  payable  at  a  particular  place,  which  no  longer  exists,  presentment  is 
excused.  Erwin  v.  Adams,  2  La.  318;  Waring  v.  Betts,  90  Va.  4G.  17  S.  E.  739. 
As  to  what  is  reasonable  diligence  in  making  inquiry,  Lambert  v.  Ghiselin,  9 
How.  552;   Daniel.  Neg.  Inst.  §§  1115-1123. 

2B6  PUTNAM  V.  SULLIVAN,  4  Mass.  45;  Lehman  v.  .Tones,  1  Watts  &  S. 
126;  Taylor  v.  Snyder.  3  Denlo.  145. 

2B7  Barrett  v.  Wills,  4  Leigh,  114;    Moore  v.  Cofli(>ld,  12  N.  C.  247. 

«68  KUVVIN  ¥.  ADAMS.  2  La.  318;  ADAJMS  V.  LELAND,  30  N.  Y.  300, 


400  PRESENTMENT    AND    NOTICE    OF   DISHONOR.  (Cll.   9 

It  is  doomed  in  such  cases  a  better  business  rule  that  the  holder 
shall  not  be  bound  to  seek  out  the  maker  or  acceptor  or  his  place 
of  residence  in  the  state  to  which  he  has  removed  for  the  purpose  of 
presentinfj  the  instrument  and  demanding  payment.*"  It  is  prob- 
ably also  the  law  that  he  is  not  bound  to  present  it  at  the  last 
known  place  of  residence  or  business  of  the  maker  or  acceptor, 
th()u;;h  the  cases  are  not  explicit  on  this  point.  The  most  that  is 
said  is  that  a  presentment  will  be  sutlicient  if  made  at  the  last 
known  place  of  residence  or  of  business;*'"  but  it  probably  would 
not  be  enjoined  upon  the  holder  that  it  be  done,  because  such  a 
formality  would  be  of  no  practical  value.  In  case  of  death  of  the 
maker  or  acceptor,  the  general  principle  which  we  have  stated  above 
governs  the  case.  If  the  instrument  is  made  payable  at  a  bank  or 
other  particular  place,  it  must  be  still  presented  there.  If  its  pre- 
sentment be  impossible,  because  of  the  death  of  the  maker  or  ac- 
ceptor, and  no  one  can  be  found  to  whom  to  make  presentment,  its 
presentment  will  be  excused.  If  a  personal  representative  has  been 
appointed,  jiresentment  and  demand  must  be  made  to  him.*®^  And 
if  there  is  no  personal  representative,  and  at  the  time  of  his  death 
the  maker  or  acceptor  had  a  known  place  of  residence,  presentment 
should  be  made  at  his  former  residence.*®*  In  this  case,  as  in  all 
others,  the  death  of  the  acceptor  or  maker  never  dispenses  with  no- 
tice to  the  drawers  and  indorsers  of  the  fact  of  non-acceptance  or 
of  non-payment.*®' 

26B  ANDEKSON  v.  DRAKE,  14  Johns.  (N.  Y.)  114. 

260  ADAMS  V.  LELAXD.  30  N.  Y.  309;  Foster  v.  Julien.  24  N.  Y.  2S;  Mc- 
GRUDER  V.  BANK  OF  WASHINGTON,  9  Wheat.  598;  DENNIE  v.  WALKER, 
7  N.  II.  11)9;  Wheeler  v.  Field,  6  Mete.  (Mass.)  290;  Herrick  v.  Baldwin,  17 
Minn.  209  (Gil.  1S3);  Gist  v.  Lybraud,  3  Ohio.  308;  Central  Bank  v.  Allen,  16 
Me.  41. 

261  Magruder  v.  Union  Bank  of  Georgetown,  8  Curt.  Dec.  299,  3  Tet  87; 
TOBY  V.  MAURIAN,  7  La.  493;  Harp  v.  Kenner,  19  La.  Ann.  G3;  Gower  v. 
Moore,  25  Me.  IG;  Shoenberger  v.  Lancaster  Sav.  Inst.,  28  Pa.  St.  459.  Ante, 
p.  383. 

262  BANK  OF  WASHINGTON  v.  REYNOLDS,  2  Cranch,  C.  C.  289.  Fed, 
Cas.  No.  954. 

«••  Oriental  Bajik  v.  Blake,  22  Pick.  20& 


§§  147-147b)     EXCUSES  fob  failure  to  present  or  give  notice.      401 

Waiver, 

The  third  class  of  cases  mentioned  in  the  principal  text  is  what 
is  known  as  "waiver."  It  may  be  of  two  kinds:  (1)  Expressed  in 
words;  or  (2)  implied  from  acts.*'*  When  presentment  of  a  bill  or 
note  at  maturity  or  notice  of  its  dishonor  has  been  dispensed  with 
by  prior  agreement,  it  would  be  a  fraud  upon  the  holder  to  per- 
mit him  to  suffer  by  acting  upon  the  assurance  of  the  party  to  whom 
he  looks  as  security  upon  the  paper.  And  it  is  fair  that  this  should 
be  enforced  against  the  indorser,  for  the  conditions  of  presentment 
and  demand  are  for  his  benefit  alone.^"  The  commonest  forms  of 
express  waiver  are  the  words  "presentation  and  protest  waived,"  or 
"notices  and  protest  of  non-acceptance  waived,"  or  words  similar  in 
form  and  import,  written  or  printed  on  the  face  of  the  bill,  or  over 
some  or  all  the  indorsements,  or  else  on  a  separate  piece  of  paper.*'" 
Where  it  is  written  on  the  face  of  the  bill  or  note,  it  applies  to  all 
the  parties.*"'  Where  it  is  written  over  some  or  all  the  indorse- 
ments, it  applies  only  to  those  indorsements  over  which  it  is  writ- 
ten.*'^    Where  it  is  written  on  a  separate  piece  of  paper,  the  in- 

a«*  Fuller  T.  McDonald,  8  Greenl.  (Me.)  213;  PORTHOUSB  v.  PARKER,  1 
Camp.  82.    See  Neg.  Inst  L.  §  142.  subd.  3;   Id.  §?  180-182. 

265  While  a  parol  waiver  is  ordinarily  sufficient  (PHIPSON  v.  KNELLBR, 
4  Camp  285,  Lane  v.  Stewart  20  Me.  98;  Smith  v.  Lownsdale,  6  Or.  78).  many 
cases  hold  that  an  undertaking,  at  the  time  of  drawing  or  indorsing,  to  dis- 
penso  with  presentment  and  notice,  is  not  a  waiver  of  performance  of  condi- 
tions precedent  but  a  term  of  the  contract,  and  that,  if  the  undertaking  be 
by  parol,  it  is  inoperative  (unless  in  the  case  of  blank  indorsements),  on  the 
ground  that  It  attempts  to  vary  the  terms  of  a  written  contract.  FREE  v. 
HAWKINS,  Holt,  N.  P.  550;  Barry  v.  Morse,  3  N.  H.  132;  Farwell  v.  Trust 
Co.,  45  Minn.  495,  48  N.  W.  326;  Goldman  v.  Davis,  23  Cal.  256;  2  Ames, 
Cas.  Bills  &  N.  814;  Boyd  v.  Cleveland,  4  Pick.  (Mass.)  525;  Fullerton  v. 
Rundlett  27  Me.  31;  Annville  Nat  Bank  v.  Kettering,  106  Pa.  St  531;  Schmied 
v.  Frank,  86  Ind.  255;  Cummings  v.  Kent,  44  Ohio  St  96,  4  N.  E.  710;  Daniel. 
Neg.  Inst.  §  1093. 

260  Spencer  v.  Harvey,  17  Wend.  489. 

287  Bryant  v.  Merchants'  Bank,  8  Bush,  43;  Farmers'  Bank  of  Kentucky  v. 
Ewing.  78  Ky.  266;  Lowry  v.  Steele,  27  Ind.  170;  Bryant  v.  Lord,  19  Minn. 
397  (Gil.  342). 

268  Woodman  v.  Thurston,  8  Cush.  (Mass.)  157;    CENTRAL  BANK  v.  DA- 
VIS, 19  Pick.  (Mass.)  373.     Parshley  v.  Heath,  69  Me.  90,  contra, 
NEG.BILLS.— 26 


402  PRE8KNTMENT    AND    NOTICE    OF    DISHONOR.  (Ch.   9 

strument  is  to  be  construed  according  to  its  terms.  In  extent,  the 
waiver  is  construed  to  apply  onlj  to  the  acts  which  it  specifies. 
Sometimes  notice  alone  is  waived;*"*  sometimes  presentment; 
sometimes  protest,  in  which  last  case  the  term  "protest"  is  deemed 
to  include  all  the  formal  facts  which  constitute  dishonor.*'^**  Any 
act,  course  of  conduct,  or  language  of  the  drawer  or  indorser  cal- 
culated to  induce  the  holder  not  to  make  demand  or  protest  or  give 
notice,  or  to  put  him  off  his  guard,  or  any  agreement  by  the  parties 
to  that  effect,  will  dispense  with  the  necessity  of  taking  these  steps 
as  against  any  party  so  dealing  with  the  holder.*^^  The  reason  for 
this  is  that  the  conditions  of  demand  and  notice  are  for  the  benefit 
and  protection  of  the  drawer  and  indorser;  and  when  his  acts  are 
such  that  the  court  cannot  protect  him  without  sanctioning  a  fraud 
or  wroug,  or  when  the  drawer  and  indorser  himself  waives  these 
proceedings,  and  consents  to  be  bound  without  them,  he  is  bound. 
A  party  to  a  contract  may  renounce  the  benefit  of  any  stipulation 
in  it  designed  for  his  own  protection.'^^* 

ConHict  of  Loads. 

Where  a  bill  or  note  is  drawn  or  indorsed  in  one  place,  and  is 
payable  by  the  acceptor  or  maker  in  another,  the  formalities  in  re- 
spect to  diligence  are  in  general  governed  by  the  law  of  the  place  of 

289  Backus  V.  Shipherd,  11  Wend.  629;  Berkshire  Bank  v.  Jones,  6  Mass. 
524;  Burnham  v.  Webster,  17  Me.  50. 

270  Coddington  v.  Davis,  1  N.  Y.  186;  Porter  v.  Kimball,  53  Barb.  467; 
SHAW  V.  McNeill,  95  N.  C.  535;   Daniel,  Neg.  Inst.  §  1095a. 

271  Story,  Bills,  §  317;  Andrews  v.  Boyd,  3  Mete.  (Mass.)  434;  Norton  v. 
Lewis,  2  Conn.  478;  Taunton  Bank  v.  Richardson,  5  Pick.  436;  Leonard  v. 
Gary,  10  Wend.  (N.  Y.)  504;  Boyd  v.  Cleveland,  4  Pick.  (Mass.)  525;  PHIPSON 
V.  KNELLER,  4  Camp.  285,  1  Starkie,  116.  In  this  case  Lord  Ellenboroiigh 
said:  "No  legal  proposition  can  be  more  clear  than  that  where  a  party  says: 
'My  residence  is  immateriaL  I  will  inquire  whether  the  bill  is  paid,'— he 
thereby  takes  upon  himself  the  onus  of  making  inquiry,  and  dispenses  with 
notice."  Whitfield  v.  Savage,  2  Bos.  &  P.  277;  Mead  v.  Small,  2  Greenl.  207; 
Hoover  v.  McCormick,  84  Wis.  215,  54  N.  W.  505,  Johns.  Cas.  Bills  &  N.  134. 

272  Sheldon  v.  Horton,  43  N.  Y.  93;  Pugh  v.  McCormick,  14  Wall.  3(31; 
Reynolds  v.  Douglass,  12  Pet.  497;  CADY  v.  BRADSHAW,  116  N.  Y.  188,  22 
N.  E.  371;  Ross  v.  Hurd,  71  N.  Y.  14. 


§§  147-147b)     EXCUSES  for  failure  to  present  ob  give  notice.      403 

payment.  So  far  as  presentment*^'  and  protest'^*  are  concerned, 
there  is  no  conflict  of  authority.  In  England  "^  the  same  rule  ap- 
plies to  the  formalities  of  notice,  and  upon  principle  and  upon  the 
ground  of  convenience  it  seems  that  notice  should  stand  upon  the 
same  footing  as  other  formalities  of  diligence.  In  the  United 
States  the  authorities  are  divided.  In  the  leading  case  of  AYMAR 
V.  SHELDON  *^'  it  was  held  that  notice  must  conform  to  the  law 
of  the  place  where  the  contract  of  the  drawer  or  indorser  is  to  be 
performed.  There  are,  however,  American  authorities  which  main- 
tain the  English  view.'^' 

aT«  ROTHSCHILD  v.  CURRIE,  1  Q.  B.  43;  Todd  v.  Neal's  Adm'r,  49  Ala. 
266;  Pierce  v.  Indseth,  106  U.  S.  546,  1  Sup.  Ct.  418;  Ellis  v.  Bank.  8  How. 
(Miss.)  294;  Snow  v.  Perking,  2  Mich.  238;  McCLANE  v.  FITCH,  4  B.  Mon. 
<Ky.)  600. 

274  TOWNSLEY  V.  SUMRALL,  2  Pet.  170;  Ellis  v.  Bank,  8  How.  (Miss.) 
294;  Chatham  Bank  v.  AUison,  15  Iowa,  357;  CARTER  v.  BANK,  7  Humph. 
(Tenn.)  547;   Simpson  v.  White,  40  N.  H.  540. 

2T6  ROTHSCHILD  V.  CURRIE.  1  Q.  B.  43;  HIRSCHFELD  v.  SMITH,  L.  R. 
1  C.  P.  340;  Home  v.  Rouquette,  3  Q.  B.  Div.  514;  ROUQUETTE  v.  OVER- 
MANX,  L.  R.  10  Q.  B.  525.  The  English  Bills  of  Exchange  Act,  $  72,  subd.  3,  so 
provides. 

27  6  12  Wend.  (N.  Y.)  439;  LEE  v.  SELLECK,  33  N.  Y.  615;  Snow  v.  Per- 
kins, 2  Mich.  238;   Story,  Bills,  §  285;    Story,  Notes,  §  177. 

277  TODD  V.  NEAL'S  ADM'R,  49  Ala.  266;  Wooley  v.  Lyon,  117  111.  244,  6 
N.  E.  885;  Daniel,  Neg.  Inst  §§  911,  912. 


404  CHECKS.  (Ch.  10 

CHAPTER  X. 

CHECKS. 

148-150.  In  General. 

151.  Checks  as  Negotiable  Instruments, 

152-154.  Presentment  and  Notice  of  Dishonor— Effect  of  Delay, 

155.  Rights  of  Holder  against  Bank. 

156-159.  Certification  and  Acceptance  of  Checks, 

160.  Failure  of  Bank  to  Honor  Check. 

IN  GENERAL. 

148.  A  check  is  a  draft  or  order  on  a  bank  or  banker^ 
purporting  to  be  dravm  on  a  deposit  of  funds,  for  the 
payment,  at  all  events,  of  a  certain  sum  of  money  to  a 
certain  person  therein  named,  or  to  him  or  his  order,  or 
to  bearer,  and  payable  instantly  on  demand.^ 

149.  A  check  resembles  an  inland  bill  of  exchange  pay- 
able on  demand,  except  that  it  is  always  dra-wrn  on  a 
banker;  and  many,  but  not  all,  of  the  rules  governing  a 
bill,  are  applicable  to  it. 

150.  In  some,  Vit  not  all,  states,  an  instrument,  in  the 
form  of  a  check,  drawn  in  one  state  on  a  banker  in 
another  state,  is  held  to  be  a  foreip^n  bill  of  exchange^ 
and  not  a  check. 

The  following  is  the  ordinary  form  of  a  check: 

Chicago,  111.,  Ang.  1st,  1S95. 
First  National  Bank  of  Chicago,  111. 
Pay  to  Adam  Smith  or  order  [or  to  Adam  Smith  simply^  or  to 
Adam  Smith  or  bearer^  or  simply  to  bearer] 

Five  hundred  and  ' Y^°° "-  •  •  Dollars. 

§500  "/loo  John  Jones. 

t  Van  Schaack,  Bank  Checks,  1,  citing  BLAIR  v.  WILSON.  28  Grat.  (Va..) 
170;  Story,  Proni.  Notes  (7th  Ed.)  §  487;  2  Daniel,  Neg.  Inst  (Sd  Ed.)  §  loGO, 


|§  148-150)  IN   GENERAL.  405 

John  Jones  is  the  drawer;  the  First  National  Bank  of  Chicago, 
111.,  is  the  drawee;  Adam  Smith  is  the  payee;  and  the  payee,  while 
be  holds  the  check,  or  any  person  who  holds  it  by  transfer  from  him, 
is  called  the  "holder."  , 

A  check  is  in  form  similar  to  an  inland  bill  of  exchange,  the  only 
difference  being  that  it  is  drawn  on  a  bank  or  banker.  The  Nego- 
tiable Instruments  Law  defines  a  check  as  a  "bill  of  exchange  drawn 
on  a  bank  payable  on  demand."  *  As  we  shall  presently  see,  more 
at  length,  however,  a  check  is  not  a  bill  of  exchange,  though  it  is 
similar  in  form,  and  though  many  of  the  incidents  of  a  bill  attach 
to  it.  In  view  of  its  resemblance  to  a  bill  in  form,  the  rules  govern- 
ing the  form  of  bills,  their  alteration,  the  capacity  of  the  parties 
thereto,  etc.,  apply  to  it,  and  it  is  unnecessary  to  do  much  more  than 
refer  to  what  has  been  said  in  this  regard  in  speaking  of  bills.  A 
few  points,  however,  may  well  be  noticed  shortly. 

A  check,  in  order  to  render  the  bank  liable  to  the  drawer  for  fail- 
ure to  pay  it,  and  to  protect  the  bank  in  paying  it,  should  it  turn 
out  to  be  invalid  for  any  reason  as  between  the  drawer  and  payee, 
should  be  dated.  The  fact  that  a  check  is  not  dated  would  naturally 
be  held  sufficient  to  put  the  bank  on  inquiry.*  It  is  even  said  that 
an  undated  check  is  never  payable.'  It  need  not  be  dated  on  the 
day  of  its  issuance,  but  may  be  dated  on  a  prior  or  subsequent  day. 
In  the  former  case  it  is  called  an  "antedated"  check ;  in  the  latter,  a 
"postdated"  check.  A  postdated  check  is  payable  on  demand  or  at 
any  time  after  its  date.f  To  be  a  check,  the  order  must  be  drawn 
on  a  bank  or  banker.  If  drawn  on  any  other  person,  it  is  a  bill 
of  exchange,  and  not  a  check.    It  need  not  appear  on  the  face  of 

•  Section  321.  This  Is,  however,  qualified  by  sections  321-325.  A  similar 
definition  is  given  by  the  English  Bills  of  Exchange  Act,  §  73,  though  some 
of  its  other  provisions  are  different. 

2  Under  the  English  Bills  of  Exchange  Act,  it  seems  that  a  check,  like  a 
bill  of  exchange,  need  not  be  dated;  that,  when  undated,  it  is  payable  on 
demand,  "because  no  time  of  payment  is  expressed."  Smith,  Bills,  C.  &  N. 
127.  See  Neg.  Inst.  L.  §§  25,  32.  If  there  is  a  blank  left  for  the  date,  the 
bolder  has  implied  authority  to  Insert  the  true  date;  but  if  he  inserts  an  un- 
true date,  witliout  the  drawer's  consent,  he  alters  the  check,  and  an  altera- 
tion of  tlie  date  renders  the  check  void.  See  Van  Schanck,  Bank  Checks 
2,  3;    Crawford  v.  West  Side  Bank.  100  N.  Y.  50.  2  N..E.  881. 

8  Van  Sihaack,  Bank  Checks,  2,  citing  Morse.  Banks  (2d  Ed.)  253. 

t  See  Neg.  Inst.  L.  8  31. 


406  CHECKS.  (Ch.  10 

it  that  the  drawee  is  a  banker,  but  it  is  safer  that  this  should  ap- 
pear, for  it  has  been  said  that  othenvise  a  bona  fide  holder  without 
knowledge  that  it  is  drawn  on  a  banker  may  treat  it  as  a  bill  of  ex- 
change. Like  a  bill,  a  check  must  contain  an  order;  the  order  must 
be  for  the  payment  unconditionally  and  at  all  events;  and  it  must 
be  for  the  payment  of  a  certain  sum  of  money.  Though  the  con- 
trary has  been  held  in  some  jurisdictions,*  yet  by  the  great  weight  of 
authority  it  is  essential  that  a  check  shall  be  payable  instantly  on 
demand;  so  that  if  an  instrument,  though  otherwise  in  the  form  of 
a  check,  and  drawn  on  a  bank,  orders  payment  on  a  day  subsequent 
to  its  date,  it  is  not  a  check,  but  a  bill  of  exchange,  and  subject, 
therefore,  to  all  the  rules  governing  bills  of  exchange, — the  rule,  for 
instance,  allowing  days  of  grace.'  A  check  must  order  payment  to 
a  person  named  in  it,  or  to  a  person  or  his  order,  or  to  a  person  or 
bearer,  or  simply  to  bearer  without  naming  any  particular  payee. 
Failure  to  designate  a  payee,  or  to  designate  him  with  sufficient  cer- 
tainty, will  render  the  check  void."  A  check  payable  to  a  person 
named  is  transferable  by  his  indorsement  in  the  same  manner  as  if 
payable  to  his  order.  A  check  payable  to  a  fictitious  person  or  or- 
der, or  to  a  name  or  figure  not  standing  for  any  person,  as  "Bills 
Payable,"  "Rent,"  "1G58,"  etc.,  or  order,  is  in  law  regarded  as  pay- 
able to  bearer,  and  is  transferable  by  delivery.'^  A  check  must,  of 
course,  be  signed  by  the  drawer,  but  the  place  of  the  signature  is 
immaterial,  provided  it  appears  to  have  been  intended  as  a  signa- 
ture; and  it  may  be  in  pencil,  or  printed,  or  stamped,  or  it  may  be 

*  In  re  Brown,  2  Story,  502,  Fed.  Cas.  No.  1,985;  CHAMPION  v.  GORDON, 
70  Pa.  St.  474. 

8B0WEN  V.  NEWELL,  8  N.  Y.  190;  BULL  v.  BANK,  123  U.  S.  105,  8 
Sup.  Ct.  62;  MORRISON  v.  BAILEY.  5  Ohio  St.  13;  WOODRUFF  v.  BANK, 
25  Wend.  (N.  Y.)  673;  HARKER  v.  ANDERSON.  21  Wend.  (N.  Y.)  372;  Min- 
turn  V.  Fisher,  4  Cal.  36;  BROWN  v.  LUSK,  4  Yerg.  (Tenn.)  209;  Georgia 
Nat.  Banli  v.  Hender.son,  46  Ga.  487;  Bradley  v.  Delaplaine,  5  Har.  (Del.) 
305;  HARRISON  v.  BANK,  41  Minn.  488.  43  N.  W.  336.  In  re  Brown,  2 
Story.  502,  Fed.  Cas.  No.  1,985;  CHA:MPI0N  v.  GORDON,  70  Pa.  St.  475; 
Westminster  Bank  v.  Wheaton,  4  R.  I.  30;  Way  v.  Towle,  155  Mass.  374,  29 
N.  E.  506,  contra.    See  Daniel,  Neg.  Inst.  §§  1573-1575. 

8  Van  Schaack,  Bank  Checks,  6;   Daniel.  Neg.  Inst.  (3d  Ed.)  §  1570. 

7  VERE  y.  LEWIS,  3  Term  R,  183;  WILLETS  v.  BANK,  2  Duer  (N.  Y.> 
121. 


§§  14S-15J)  IK   GENERAL.  407 

the  drawer's  mark.*     The  points  of  difference  between  a  check  and 
a  bill  of  exchange  will  be  presently  sliown. 

Memorandum  Checks. 

It  is  necessary  to  notice  shortly  a  class  of  checl^s  of  a  peculiar  char- 
acter, known  as  "memorandum  checks."  In  form  and  appearance 
a  memorandmn  check  does  not  differ  from  ordinary  checks,  except 
that  on  the  face  of  them  is  written  the  word  "memorandum,"  or 
"mem.,"  or  "memo."  Such  a  check  "is  given  by  the  maker  to  the 
payee  rather  as  a  memorandum  of  indebtedness  than  as  a  payment. 
Between  those  parties  it  is  considered  as  a  duebill,  or  an  L  O.  U. 
It  can  be  sued  upon  aa  a  promissory  note,  without  presentment  to 
the  bank,  whereas  the  holder  of  a  regular  check  must  first  demand 
its  payment  at  bank,  and  be  refused,  before  he  can  maintain  an 
action  against  the  drawer."'  The  fact  that  the  word  "memoran- 
dum," or  "mem.,"  or  "memo.,"  is  written  on  a  check,  makes  it  a  memo- 
randum check.  The  bank,  however,  is  not  bound  to  pay  any  atten- 
tion to  these  words,  or  to  recognize  any  contract  as  implied  between 
the  maker  and  payee  which  gives  the  check  any  peculiar  character. 
If  such  a  check  is  presented  for  payment,  and  the  drawer  has  suifi- 
cient  funds  to  meet  it,  the  bank  must  honor  it  like  any  ordinary  check. 
If  the  agreement  between  the  maker  and  payee  is  that  it  shall  not 
be  presented  for  payment,  any  remedy  of  the  drawer  for  the  breach 
of  such  agreement  is  solely  against  the  payee.*' 

A  memorandum  check  presents  all  the  features  of  other  negotiable 
instruments  when  transferred  or  indorsed  to  a  bona  fide  holder  for 
value.**  "A  memorandum  check  is  a  contract  by  which  the  maker 
engages  to  pay  the  bona  fide  holder  absolutely,  and  not  upon  a  con- 
dition to  pay  if  the  bank  upon  which  it  be  drawn  should  not  pay  upon 
presentation  at  maturity,  ard  if  due  notice  of  the  presentation  and 
nonpayment  should  be  given."  *" 

«  Van  Schaack,  Bank  Checks,  7,  8.  And  see  BROWN  v.  BANK.  6  Hill  (N. 
Y.)  443;  SHANK  v.  BUTSCH,  28  Ind.  19;  Com.  v.  Kay,  3  Gray  (Mass.)  441, 
447;    I'ENMXGTON  v.  BAEIIR,  48  Cal.  5G5. 

•  Van  Schnack,  Bank  Checks,  184. 

10  Morse,  Banks,  313. 

11  Van  Srhaack,  Bank  Checks,  185. 

1'  Fi-auklin  Bank  v.  Freeman,  lU  Pick.  Ofass.)  535.    See,  also,  as  to  this 


408  CHECKS.  (Ch.  10 

Drafts  on  a  Bank  in  Another  Slate. 

It  would  seem  that  a  draft  in  the  form  of  a  check  drawn  in  one 
state  on  a  bank  in  another  state  should  not  be  regarded  as  a  check, 
but  as  a  foreign  bill  of  exchange,  and  therefore  subject  to  the  rules 
governing  those  instruments;  ^'  but  the  question  has  not  been  ex- 
pressly decided,  and  there  are  intimations  to  the  contrary.^* 

CHECKS  AS  NEGOTIABLE  INSTRUMENTS. 

151.  A  check  is  not  a  bill  of  exchange,  but  it  is  in  the 
nature  of  a  bill  of  exchange  payable  on  demand,  and  is 
governed  by  most  of  the  rules  applicable  to  such  an  in- 
strument. It  is  subject  to  the  same  rules  as  regards 
transfer,  indorsement,  and  negotiability. 

A  check  is  defined  in  Negotiable  Instruments  Law  as  "a  bill  of 
exchange  drawn  on  a  bank  payable  on  demand,"  and  it  is  also 
thus  defined  by  some  text  writers  and  judges.^'  But,  though  it  is 
true  that  it  is  in  the  form  and  nature  of  an  inland  bill  of  exchange 
payable  on  demand,  and  though  it  is  governed  by  most  of  the  rules 
applicable  to  such  an  instrument,  it  is  not  a  bill  of  exchange,  but  a 
distinct  commercial  instrument.^"  It  differs  from  a  bill  of  ex- 
class  of  checks,  GUSHING  v.  GORE,  15  Mass.  69;  DYKERS  v.  BANK,  11 
Paige  (N.  Y.)  612. 

13  DICK  INS  V.  BEAX.,  10  Pet.  572,  579;  Bank  of  U.  S.  v.  Daniel,  12  Pet. 
32,  52.     See  BULL  v.  BANK,  123  U.  S.  105,  8  Sup.  Ct.  62. 

1*  See  Roberts  v.  Corbin,  26  Iowa,  315;  LITTLE  v.  BANIv,  2  Hill  (N.  Y.) 
425. 

i«  WHISTLER  V.  FORSTER,  14  C.  B.  (N.  S.)  248;  Ohalm.  Bills  Exch.  245; 
McLean  v.  Clydesdale  Banking  Co.,  9  App.  Cas.  95.     Ante,  p.    405. 

16  BLAIR  V,  WILSON,  28  Grat.  (Va.)  170;  Merchants'  Nat.  Bank  v.  State 
Nat.  Bank.  10  Wall.  W7;  Lynn  v.  Bell,  10  Ir.  C.  L.  490;  KEENE  v.  BEARD, 
8  C.  B.  (N.  S.)  380;  HOPKINSON  v.  FORSTER,  L.  R.  19  Eq.  70;  MuUick  v 
Radakissen,  9  Moore,  P.  O.  69.  "In  a  sense,  undoubtedly,  a  check  Is  a  species 
of  bill  of  exchange,  and  in  a  sense,  also,  it  is  a  distinct  commercial  instru- 
ment; but  according  to  the  understanding  of  merchants,  and  according  to 
our  statutes,  these  instruments  were  checks,  and  not  bills  of  exchange.  'A 
check  is  an  order  to  pay  the  holder  a  sum  of  money  at  the  bank,  on  present- 
ment of  the  check  and  demand  of  the  money.  No  previous  notice  is  neces- 
sary;   no  acceptance  is  required  or  expected;    it  has  no  days  of  grace.     It 


§  151)  CHECKS   AS    NEGOTIABLK    INSTRUMENTS.  409 

change,  as  we  shall  see,  in  that,  in  the  case  of  a  bill  of  exchange,  the 
drawer  is  discharged  by  default  of  the  payee  or  holder  in  making 
due  presentment  to  the  drawee,  and  in  giving  notice  in  case  of  dis- 
honor, while,  in  the  case  of  a  check,  the  drawer  is  not  discharged  by 
delay  in  presentment,  or  in  giving  notice  of  dishonor,  unless  the  de- 
lay was  unreasonable  under  the  circumstances,  and,  further  than 
this,  unless  the  drawer  was  prejudiced  thereby,  as  by  failure  of  the 
banker  before  presentment^^  A  check  is  not  due  until  payment  is 
demanded,  and  the  statute  of  limitations  runs  only  from  that  time.^® 
It  further  differs  from  a  bill  of  exchange  in  that  it  is  always  drawn 
upon  a  bank  or  banker;  ^°  and  that  it  is  payable  immediately  upon 
presentment,  without  the  allowance  of  any  days  of  grace;  ^^  and 
that  it  is  never,  as  a  matter  of  right,  presentable  for  acceptance,  but 
only  for  payment, ^^  though,  if  the  holder  requests  and  the  banker 
chooses,  the  latter  may  accept  it.*  A  foreign  bill  of  exchange  must 
be  protested  to  hold  the  drawer  or  an  indorser;  but  a  check,  unless 
drawn  out  of  the  state,  in  which  case  perhaps  it  would  be  regarded, 
not  as  a  check,  but  as  a  foreign  bill  of  exchange,  need  not  be  pro- 
tested 

A  check,  however,  is,  as  stated  above,  in  the  nature  of  an  inland 
bill  of  exchange  payable  on  demand,  and  is  precisely  like  a  bill  of 
exchange  in  its  incidents,  except  as  above  stated.  Like  a  bill  of 
exchange,  it  is  a  negotiable  instrument,  if  negotiable  in  fonn,  and  it 
is  subject  to  the  same  rules  as  regards  its  transfer.  It  may  be  trans- 
ferred by  indorsement,  for  instance,  and  the  indorsement  will  im- 
pose upon  the  indorser  the  ordinary  liabilities  which  flow  from  the 

Is  payable  on  presentment,  and  not  before.'  BuUard  v.  Randall,  1  Gray, 
605,  606."     MINOT  v.  RUSS,  156  Mass.  458,  31  N.  E.  489. 

18  Per  Byles,  J.,  in  KEEXB  v.  BEARD,  supra.  Post,  p.  412;  Merchants' 
Nat.  Bank  v.  State  Nat.  Bank,  supra;  Lester  v.  Given,  8  Bush  (Ky.)  3G0;  In 
re  Brown,  2  Story.  502,  Fed.  Cas.  No.  1,985. 

i»  Merchants'  Nat.  Bank  v.  State  Nat.  Bank,  supra. 

20  MORSE  V.  BANK,  Holmes,  209,  Fed.  Cas.  No.  9.857;  Merchants'  Nat. 
Bank  v.  State  Nat.  Bank,  supra;    In  re  Brown,  supra. 

21  MORSE  V,  BANK,  supra;  Merchants'  Nat.  Bank  v.  State  Nat.  Bank, 
Bupra;  In  re  Brown,  supra;  BOWEN  v.  NEWELL,  8  N.  Y.  190;  WOOD- 
RUFF V.  BANK.  25  Wend.  (N.  Y.)  673. 

22  MORSE  V.  BANK,  supra;    In  re  Brown,  supra. 

•  First  Nat.  Bunk  v.  WhiUiiau,  94  U.  S.  343,  per  Hunt.  J. 


410  CHECKS.  (Ch.  10 

indorsement  of  a  bill  of  exchange  or  negotiable  promissory  note.'^ 
And  it  makes  no  difference  that  the  check  was  payable  to  bearer, 
for,  like  a  bill  or  note  payable  to  bearer,  though  it  is  transferable  by 
mere  delivery,  it  may  also  be  transferred  by  indorsement  of  the  payee, 
or  of  any  subsequent  holder.  In  such  a  case  the  indorser  incurs  the 
same  liabilities  and  obligations  as  the  indorser  of  a  check,  bill,  or 
note  payable  to  order.** 

A  check,  whether  uncertified  or  certified,  as  will  be  presently 
explained,  by  the  bank  upon  which  it  is  drawn,  passes  to  a  bona 
fide  purchaser  or  transferee  for  value  free  from  all  equities  ex- 
isting between  the  drawer  and  the  payee  or  first  holder  of  which 
the  transferee  had  no  notice,  whether  the  check  is  payable  to  bearer 
and  transferred  by  delivery  merely  or  by  indorsement  and  deliv- 
ery, or  is  payable  to  order  and  is  transferred  by  indorsement  and 
delivery.*"  In  the  latter  case  indorsement  is  necessary  to  protect 
the  holder.*"  The  principles  governing  the  transfer  of  checks  are 
in  this  respect  the  same  as  those  which  govern  the  transfer  of 
negotiable  bills  and  notes.  A  check  not  being  due  until  payment 
is  demanded,  it  cannot,  as  a  rule,  until  then  be  treated  as  overdue, 
and  it  may  at  any  time  be  transferred  to  a  bona  fide  holder;  but 
it  is  held  in  most  jurisdictions  where  the  question  has  arisen  that, 
if  the  check  is  "stale"  when  transferred,  it  is  to  be  regarded  in 
respect  to  its  transfer  like  an  overdue  bill  or  note,  so  that  the 
transferee  will  not  be  protected  against  equities.*' 

In  KEEXE  v.  BEARD,*'  where  it  was  held  that  a  check  can  pass 
by  indorsement,  and  the  indorser  is  liable  as  on  an  ordinary  nego- 
tiable instrument,  the  holder  of  a  check  payable  to  the  payee  or 

23  This  was  held  in  KEENE  v.  BEARD,  supra.  The  name  written  on  the 
back  of  the  check  must  be  intended  as  an  indorsement.  There  must  be  an 
animo  indorsandi.     KEENE  v.  BEARD,  supra. 

24  KEENE  V.  BEARD,  supra;   Story,  Prom.  Notes,  §  132. 

26  WILLETS  v.  BANK,  2  Duer  (N.  Y.)  121;  Whistler  v.  Forster,  14  C.  B. 
(N.  S.)  24S. 

26  Whistler  v.  Forster,  supra.  In  this  case  It  was  held  that  while  the 
bona  fide  indorsee,  for  value  and  without  notice,  of  a  check  payable  to 
order,  is  protected  against  equities  between  the  drawer  and  the  bank,  a  per- 
son to  whom  a  check  payable  to  order  is  transferred  unindorsed  is  not  so 
protected,  as  the  transfer  is  a  mere  equitable  assignment. 

2T  This  will  be  shown  presently.     Post,  p.  417. 

28  8  C.  B.  (N.  S.)  372. 


§  151)  CHECKS    AS    NEGOTIABLE    INSTRUMENTS.  411 

bearer,  and  indorsed  and  delivered  by  the  payee  to  a  third  per- 
son, and  by  the  latter  to  the  present  holder,  sued  the  payee  on 
his  indorsement,  and  it  was  held  that  he  was  entitled  to  recover.'* 
"The  point  urged"  by  counsel  for  the  defendant,  it  was  said  by 
Erie,  C.  J.,  "was  that  a  check  is  not  to  be  classed  with  bills  of  ex- 
change so  far  as  to  be  capable  of  creating  a  liability  in  an  indorser 
to  the  person  who  may  be  the  holder  or  bearer  of  the  instrument. 
I  think  he  has  failed  to  establish  that  proposition.  A  check  is 
strongly  analogous  to  a  bill  of  exchange  in  many  respects.  It  is 
drawn  upon  a  banker;  and,  though  in  practice  the  banker  does 
not  accept  the  draft,  he  might,  for  aught  I  know,  do  so.  A  check 
has  also  some  of  the  incidents  of  a  bill  of  exchange,  if  not  all;  as, 
in  respect  of  its  passing  by  delivery,'"  and  also  in  respect  of  a 
bona  fide  holder  taking  it  for  value  having  a  better  title  than  the 
person  from  whom  he  received  it.  Having  these  incidents  of  a 
bill  of  exchange,  has  it  the  further  incident  of  being  capable  of 
passing  by  indorsement?  that  is,  where  the  indorsement  is  made, 
not  by  merely  placing  the  name  of  the  party  on  the  back  of  the 
instrument,  but  doing  so  with  the  intention  of  passing  the  title 
to  it,  and  of  incurring  all  the  usual  liabilities  of  an  indorser  of  a 
negotiable  instrument?  It  is  admitted  here  that  the  defendant's 
name  was  placed  upon  the  check  animo  indorsandi,  and  therefore 
our  judgment  for  the  plaintiff  is  in  accordance  with  the  real  in- 
tention of  the  parties.  The  indorser  intended  to  give  the  indorsee 
the  security  of  his  name  and  liability  on  the  instrument.  I  also 
think  our  decision  is  in  accordance  with  the  law,  when  we  hold 
that  a  check  is  a  negotiable  instrument,  and  capable  of  indorse- 
ment." 

To  be  negotiable,  a  check  must  be  in  the  form  of  a  negotiable 
instrument.  The  rules  governing  bills  of  exchange  in  this  respect 
apply  equally  to  checks.  Thus,  if  a  check  is  payable,  not  abso- 
lutely, but  on  a  contingency,  it  is  not  negotiable.**' 

2»  The  defendant  in  this  case  dennirrcd  on  the  ground  that  by  Indorsing 
the  check  he  did  not  render  himself  liable  to  an  action  on  the  check  at  the 
^uit  of  a  third  party,  or  bearer,  upon  the  dishonor  thereof. 

»o  The  court  Is  here  speaking  of  checks  payable  to  bearer,  or  to  A,  or  bearer, 
and  not  of  (■li<''j<s  iiriynlih'  to  a  jiors'ui,  f)r  order. 

»»  See  LITTLE  r.  BANK,  2  HIU  (N.  Y.)  425w 


412  CHECKS.  (Ch.  10 

PRESENTMENT    AND    NOTICE    OF    DISHONOB— EFFECT    OF 

DELAY. 

152.  The  dra-wer  of  a  check  is  not  discharged  from  his 
obligation  by  unreasonable  delay  in  prtjentment  of  the 
check  for  payment,  or  in  giving  him  notice  of  dishonor, 
in  case  of  presentment  and  dishonor,  unless  he  has  been 
actually  prejudiced  thereby;  but  if  he  has  suffered  a  loss 
thereby,  as  by  failure  of  the  bank,  he  is  discharged  to 
the  extent  of  his  loss, 

153.  In  determining  -what  is  a  reasonable  time,  regard 
must  be  had  to  the  nature  of  the  instrument,  the  usage 
of  trade  and  of  bankers,  and  the  facts  of  the  particular 
case.  A  check  is  to  be  deemed  to  have  been  presented 
-within  a  reasonable  time  when  presented  according  to  the 
following  rules: 

(a)  If  the  person  w^ho  receives   it  and   the  banker  are 

in  the  same  place,  it  must,  in  the  absence  of 
special  circumstances,  be  presented  during  busi- 
ness hours  of  the  next  secular  day  after  it  is 
received. 

(b)  If  the  person  who  receives  it  and   the  banker  are 

in  different  places,  it  must,  in  the  absence  of 
special  circumstances,  be  forwarded  for  present- 
ment on  the  next  secular  day  after  it  is  re- 
ceived, and  the  agent  to  w^hom  it  is  sent  must 
present  it  during  business  hours  of  the  next 
secular  day  after  it  is  received  by  him. 

154.  STATUS  OF  *' STALE"  CHECK— If  the  delay  in 
presenting  a  check  is  so  unreasonable  as  to  make  the 
check  "stale"  (a  year  and  a  half,  for  instance,  or  perhaps 
five  months,  or  even  less),  the  bank  will  be  put  upon  in- 
quiry as  to  equities  of  the  draw^er,  and  will  pay  at  its 
peril;  and  the  check  w^ill  perhaps  be  treated  like  an  over- 
due bill,  and  cease  to  be  negotiable. 


§§  152-154)  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  41S 

As  has  been  seen,  delay  in  presenting  a  bill  of  exchange  either 
for  acceptance,  or  for  payment  after  acceptance,  will  operate  to  dis- 
charge the  drawer  from  his  obligation.  Checks,  however,  in  this 
respect,  stand  on  a  very  different  footing.  A  check  is  not  present- 
able at  all  for  acceptance,  but  is  presentable  for  payment  only, 
though  the  bank,  as  we  shall  see,  may  accept  it  if  it  chooses  and 
the  holder  so  desires.  And  there  is  no  fixed  rule  as  to  the  time 
within  which  a  check  must  be  presented  for  payment.  It  is  pay- 
able on  demand,  and  demand  may  be  made  at  any  time  within  the 
period  of  the  statute  of  limitations.  Certain  consequences  may  re- 
sult, however,  from  delay  in  presenting  a  check,  so  that,  while  de- 
lay may  not  under  ordinary  circumstances  affect  the  rights  of  the 
holder,  it  is  always  unsafe.*  , 

In  no  case  will  delay  in  presentment  discharge  the  drawer  from 
his  obligation  either  on  the  check  or  on  the  original  consideration, 
unless  it  can  be  shown  that  he  was  prejudiced  thereby.'*  When  a 
man  gives  a  check,  he  should  see  that  he  does  not  withdraw  the 

•  Indorsers  stand  on  a  different  footing  from  the  drawer;  and,  as  In  the 
case  of  bills  of  exchange,  unless  presentment  be  made,  and  notice  given, 
within  a  reasonable  time,  they  are  discharged.  MERCHANTS'  BANK  v. 
SPICER,  6  Wend.  (N.  Y.)  445;  MURRAY  v.  JUDAH,  6  Cow.  (N.  Y.)  490; 
Daniel,  Neg.  Inst.  {  1587.  See  Kirkpatrick  v.  Puryear,  93  Tenn.  409,  24  S. 
W.  1130. 

8  2  SERLH  V.  NORTON,  2  Moody  «&  R.  401,  and  ROBINSON  v.  HAWKS- 
FORD,  9  Q.  B.  52,  among  many  other  cases,  sustain  this  proposition.  In 
Serle  v.  Norton,  a  check  dated  March  19th  was  not  presented  until  April 
6th,  when  payment  was  refused.  The  holder  sued  the  drawer,  and  the 
latter  pleaded  delay  on  presentment  No  excuse  for  the  delay  was  shown, 
but  it  did  not  appear  that  the  bank  had  failed,  or  that  the  defendant  was 
otherwise  prejudiced.  The  plaintiff  had  a  verdict  In  ROBINSON  v. 
HAWKSFORD,  a  check  drawn  on  June  13th  was  not  presented  for  payment 
until  June  2Sth,  when  payment  was  refused  by  direction  of  the  drawer  given 
on  the  21st.  The  payee  sued  the  drawer,  who  pleaded  delay  In  presentment. 
It  was  held  that  the  delay  was  immaterial,  since  no  inconvenience  resulted, 
and  that  the  defendant  was  not  discharged  from  his  liability  on  the  check,  so 
as  to  leave  the  plaintiff  to  sue  on  the  consideration  for  It.  There  are  many 
cases  to  the  same  effect  See  BULL  v.  BANK,  123  U.  S.  105,  8  Sup.  Ct  G2; 
LITTLE  v.  BANK,  2  Hill  (N.  Y.)  425,  7  Hill  (N.  Y.)  359;  Hoyt  v.  Seeley,  18 
CJonn.  353;  Tack  v.  Thomas,  13  Smedes  &  M.  11;  Purcell  v.  AUemong,  22  Grat. 
(Va.)  7.39;  Howes  v.  Austin,  35  lU.  396;  Heartt  v.  Rhodes,  66  111.  351;  Stevens 
V,  Park.  73  III.  .187;  Ilensliaw  v.  Root,  60  In(L  220;  STEWART  v.  SMITH,  17 
Ohio  St  82;   Kluyon  v.  Stanton,  44  Wifl.  479. 


414  CHECKS.  (Ch.  10 

money  that  is  there  to  meet  it.  Allowing  the  money  to  remain  there 
cannot  prejudice  him. , 

If  the  delay  is  unreasonable,  and  the  drawer  is  prejudiced  thereby, 
he  will  be  discharged  from  his  obligation,  both  on  the  check  and  on 
the  original  consideration,  to  the  extent  of  his  loss,  but  only  to  that 
extent.'*  Thus,  if  the  holder  of  a  check  fails  to  present  it  within 
a  reasonable  time,  and  the  bank  becomes  insolvent,  so  that  the 
drawer  loses  the  whole  amount  of  the  check  which  he  had  on  deposit 
to  meet  it,  the  loss  will  fall  on  the  holder,  and  the  drawer  will  be 
entirely  discharged.  It  would  be  unreasonable  to  pemiit  the  holder 
to  allow  the  money  to  remain  in  the  bank  indefinitely  at  the  risk  of 
the  drawer,  who  has  no  means  of  protecting  himself.  If  the  bank 
should  pay  the  drawer  50  cents  on  the  dollar,  so  that  he  would  only 
lose  half  the  amount  of  the  check,  he  would  only  be  discharged  as  to 
the  other  half.  If  he  had  no  money  at  all  in  the  bank,  though  the 
bank  might  have  honored  his  check,  he  would  not  be  discharged 
at  all.  In  all  cases  there  must  be  both  unreasonable  delay  and 
prejudice.  ""UTien  a  loss  has  occurred  by  the  check  not  being  pre- 
sented, it  is  necessary  to  inquire  if  there  was  any  unreasonable  de- 
lay. •  •  •  Under  ordinary  circumstances,  the  only  rule  is,  that, 
if  things  have  continued  the  same,  and  no  damage  has  arisen  from 
delay  of  presentment,  the  drawer  continues  liable."  "*  It  is  in  this 
sense  only  that  the  drawer  is  entitled  to  have  his  check  presented 
within  a  reasonable  time. 

In  no  case  will  the  drawer  be  discharged  unless  the  delay  was  un- 
reasonable under  the  circumstances  of  the  particular  case.  If  the 
bank  on  which  a  check  is  drawn  should  fail  after  issue  of  the  check, 
and  before  presentment,  there  being  no  unreasonable  delay  in  pre- 
senting it,  the  loss  would  fall  on  the  drawer,  and  he  would  continue 
liable  on  the  check,  or  on  the  original  consideration.  Though  the 
question  as  to  what  is  a  reasonable  time  for  presentation  of  a  check 
must  depend  upon  the  circumstances.  It  may  be  laid  down  as  a  gen- 
eral rule,  that  under  ordinary  circumstances,  and  where  the  payee 
or  holder  is  in  the  same  place  where  the  bank  is  located,  the  check 
must  be  presented  during  banking  hours  of  the  next  secular  day 

83  See  the  cases  above  cited.  And  see  Alexander  v.  Burchfield,  7  Man.  & 
G.  1061;   Neg.  Inst.  L.  §  322. 

«*  Per  Lord  Denuian,  C.  J.,  in  ROBINSON  v.  HAWKSFORD,  supra. 


§§  152-154)         PRESENTMENT    AND    NOTICE    OF    DISHONOR.  415 

after  the  day  on  ^liich  it  is  received  by  him;  any  longer  delay  will 
be  unreasonable,  and  at  his  peril,"  K  the  bank  is  located  at  a  dis- 
tant place,  the  check  must  be  mailed  to  that  place  for  collection  not 
later  than  during  business  hours  of  the  next  secular  day  after  its  re- 
ceipt; and  the  person  to  whom  it  is  sent  must  present  it  not  later 
than  during  business  hours  of  the  next  secular  day  after  its  receipt 
by  him."  These  rules  apply  under  ordinary  circumstances  only. 
There  may  be  circumstances  under  which  a  greater  delay  would  not 
be  regarded  as  unreasonable.'^ 

In  like  manner,  and  for  the  same  reason,  contrary  to  the  rule  gov- 
erning bills  of  exchange,  the  drawer  of  a  check  is  not  discharged  by 
failure  of  the  holder  to  give  him  notice  of  the  dishonor  of  the  check 
by  the  bank,  unless  he  has  been  prejudiced  thereby."  Notice 
should  be  given,  however,  within  a  reasonable  time  (ordinarily,  not 
later  than  the  next  secular  day  after  the  bank  refuses  payment),  so 
as  to  enable  the  drawer  to  take  steps  to  protect  himself.  If  such  no- 
tice is  not  given,  and  the  drawer  is  prejudiced,  he  will  be  discharged 

88  Alexander  v.  Burchfield,  7  Man.  &  G.  1061,  11  Law  J.  C.  P.  253;  SMITH 
V.  MILLER,  43  N.  Y.  171;  BICKFORD  v.  BANK,  42  HI.  238;  Farwell  v.  Cur- 
tis, 7  Biss.  165,  Fed.  Cas.  No.  4,690;  Hamilton  v.  Lumber  Co.,  ^  Mich.  436, 
54  N.  W.  903;  GRANGE  v.  REIGH,  93  Wis.  552,  67  N.  W.  1130.  If  tlie  day 
following  the  day  the  check  is  delivered  is  Sunday  or  a  legal  holiday,  presen- 
tation on  the  next  day  is  in  time.     O'Brien  v.  Smith,  1  Black,  99. 

8  6  Hare  v.  Henty,  30  Law  J.  C.  P.  302;  Prideaux  v.  Ciiddle,  L.  R.  4  Q.  B. 
455;  Heywood  v.  Pickering,  L.  R.  9  Q.  B.  428;  SMITH  v.  JANES,  20  Wend. 
<N.  Y.)  192;  Northwestern  Coal  Co.  v.  Bowman,  69  Iowa,  150,  28  N.  W.  490. 
This  rule  does  not  apply  where  the  payee  deposits  the  check  for  collection 
in  a  bank  in  the  same  place  where  he  resides  and  the  drawee  bank  is  located. 
In  such  a  case  the  check  must  be  presented  on  the  next  secular  day  after  it 
was  received  by  the  payee.  SMITH  v.  MILLER,  43  N.  Y.  171;  Farwell  v. 
Curtis,  7  Biss.  165,  Fed.  Cas.  No.  4,690.  If  time  is  lost  by  depositing  in  a 
bank  which  forwards  in  a  roundabout  way,  this  is  unreasonable  delay.  Moule 
V.  Brown,  4  Bing.  N.  C.  206;  Harvey  v.  Bank.  119  Pa.  St.  212,  13  Atl.  202; 
First  Nat.  Bank  v.  Bank,  80  Md.  475,  31  Atl.  302;  GREGG  v.  BEANE,  09 
Vt.  22,  37  Atl.  248;  GIFFORD  v.  HARDELL,  88  Wis.  538,  60  N.  W.  1004; 
First  Nat.  Bank  v.  Miller,  37  Neb.  500,  55  N.  W.  1064;  43  Neb.  791,  62  N.  W. 
195.     Cf.  HOLMES  v.  ROE.  62  Mich.  199,  28  N.  W.  864. 

87  See  Freiberg  v.  Cody,  55  Mich.  108,  20  N.  W.  813;  Cox  v.  Boone,  8  W.  Va. 
500;   Firth  v.  Brooks,  4  I.aw  T.  (N.  S.)  4(57. 

8  8  BULL  V.  BANK,  123  U.  S.  105,  8  Sup.  Ct.  62;  Mcroliauts'  Nat.  Biiiik  v. 
State  Nat.  Bank,  10  Wall.  607;  Heartt  v.  Rhodes,  66  111.  351;  Lester  v.  Given, 
8  Bush    (Ky.)  360;   STEWAIiT  v.  SMITH,  17  Ohio  SL  8& 


416  CHECKS.  (Ch.  10 

pro  tanto.  The  notice  of  dishonor  need  not  be  in  any  particular 
form.  It  may  be  oral  as  well  as  written.  All  that  is  required  is 
that  the  fact  of  dishonor  shall  be  made  known  to  the  drawer.'* 

It  is  not  necessary,  in  the  absence  of  a  statute,  that  a  check  shall 
be  protested  on  refusal  of  the  drawee  to  pay  it,  in  order  to  hold  the 
drawer  thereon;  but  it  is  safer  to  adopt  this  course,  for  the  notary's 
certificate  will  be  prima  facie  proof  of  presentment  and  dishonor.** 
Protest,  however,  is  not  necessary.  Parol  evidence  of  presentment 
and  refusal  is  sufficient.** 

The  circumstances  which  will  excuse  the  holder  of  a  check  for 
failure  to  present  it  in  accordance  with  the  rules  above  stated  are, 
with  few  exceptions,  the  same  as  those  which  will  excuse  the  failure 
to  present  a  bill  of  exchange.  The  valid  excuses,  which  "are  mostly 
based  upon  the  old  adage  of  the  civil  law,  Impossibilium  nulla 
obligatio  est,'"  are  thus  stated  by  Mr.  Van  Schaack:*'  (1)  Where 
the  drawer  had  not  sufficient  funds  in  the  bank  when  it  was  reason- 
able to  suppose  the  check  would  be  presented;  (2)  where  he  with- 
drew his  funds  before  presentment;  (3)  removal  of  the  drawee 
bank;  (4)  inevitable  accident  or  overwhelming  calamity;  (5)  the 
presence  of  political  circumstances  amounting  to  a  virtual  interrup- 
tion and  obstruction  of  the  ordinary  negotiations  of  trade;  (6)  the 
breaking  out  of  war  between  the  country  of  the  maker  and  that 
of  the  holder;  (7)  occupation  of  the  country  where  the  parties  lived, 
or  where  the  check  was  payable,  by  a  public  enemy,  and  suspension 
of  commercial  intercourse;  (8)  sudden  illness  or  death  of  the  holder 
or  his  agent;  (9)  general  prevalence  of  a  malignant  disease,  such 
as  yellow-  fever  or  cholera,  to  such  an  extent  as  to  stop  all  trade 
in  the  place;  (10)  impossibility  of  reaching  the  bank,  by  reason  of 
snow,  freshets,  or  overwhelming  accidents;  (11)  when  it  was  known 

«»  Williams  v.  Bank  of  U.  S.,  2  Pet.  96;  MILLS  v.  BANK,  11  Wheat.  431; 
Bank  of  Alexandria  v.  Swann,  9  Pet.  33;  Bowling  v.  Harrison,  6  How.  248. 
Immaterial  mistakes  will  not  render  the  notice  ineffectual.  MILLS  v.  BANK, 
supra;   DENNISTOUN  v.  STEWART,  17  How.  606. 

*o  TOWNSLEY  v.  SUMRALL,  2  Pet.  170. 

*i  Buckner  v.  Finley,  2  Pet.  589;  BURKE  v.  McKAY,  2  How.  66;  Mechan- 
ics' &  Traders'  Ins.  Co.  v.  Coons,  36  La.  Ann.  271;  Bowling  v.  Harrison,  6 
How.  248;  Williams  v.  Bank  of  U.  S..  2  Pet.  90;  Moses  v.  Franklin  Bank,  34 
Md.  574;  Norris  v.  Despard,  38  Md.  491;  HARKER  v.  ANDERSON,  21  Wend. 
(N.  Y.)  372;   Young  v.  Bryan,  6  Wheat.  146;   Union  Bank  v.  Hyde,  Id.  572. 

*aVan  Schaack,  Bank  Checks,  53,  54.    And  see  BLAIR  v.  WILSON,  28 


5§  152-154)  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  417 

that  the  check  could  not  be  paid  by  the  bank,  as  because  of  its 
bankruptcy  and  suspension,  or  a  public  and  notorious  injunction 
issued  against  it.*'  Kotice  of  the  existence  of  these  circumstances 
should  be  given  the  drawer,  if  unknown  to  him,  as  soon  as  possible 
and  practicable,  or  the  excuse  will  not  avail.** 
Status  of  a  ^^ Stale"  Check. 

While,  as  we  have  just  seen,  the  drawer  of  a  check  is  not  dis- 
charged by  unreasonable  delay  of  the  holder  in  presenting  it  for 
payment,  unless  prejudice  can  be  shown  to  have  resulted,  it  is  al- 
ways unsafe  to  delay  presentation,  not  only  because  loss  may  thus 
discharge  the  drawer  or  indorser,  but  for  the  further  reason  that 
a  "stale"  check  is  rightly  looked  upon  with  suspicion,  for  checks 
are  not  supposed  to  remain  long  in  circulation.  The  fact,  therefore, 
that  a  check  is  stale  when  presented  for  payment  has  been  held 
Bufficient  to  put  the  bank  upon  inquiry,  so  that,  if  it  pays  such  a 
check  without  inquiry,  it  will  be  held  to  have  done  so  at  its  peril 
in  case  the  check  is  for  any  reason  invalid  as  against  the  maker.*" 
It  has  also  been  held  that  the  staleness  of  a  check  is  sufficient  to 
put  a  purchaser  of  it  upon  inquiry  as  to  equities  that  may  exist 
between  the  drawer  and  the  payee.**  No  certain  rule  has  been 
laid  down  for  determining  when  a  check  is  to  be  regarded  as  stale, 
nor  can  any  rule  be  gathered  from  the  decided  cases.  It  seems 
that  a  check  is  not  stale  if  it  is  only  a  few  days,  or  even  a  month, 
old;*'  but  a  check  has  been  held  stale  when  it  was  a  year  and  a 
half  old,**  and  even  where  it  was  five  months  old.*' 

Grat.  (Va.)  1G5,  172;  Bell  v.  Alexander,  21  Grat.  1,  6;  Fletcher  v,  Pierson,  69 
Ind.  281;  Lovett  v.  Corn  well.  6  Wend.  (N.  Y.)  3G9;   Rhett  v.  Poe,  2  How.  457. 

48  Van  Schaack,  Bank  Checks,  53-55;  Lovett  v.  Cornwell,  6  Wend.  (N.  Y.) 
SCO;  ante,  p.  394,  where  excuses  for  noupresentment  of  bills  of  exchange  are 
shown. 

44  See  Purcell  v.  Allemong,  22  Grat.  (Va.)  739. 

4B  Daniel,  Neg.  Inst.  (3d  Ed.)  §  1(»32;  Lancaster  Bank  v.  Woodward,  18  Pa. 
St.  357. 

46  FIRST  NAT.  BANK  V.  NEEDHAM,  29  Iowa,  249;  Skillman  v.  Titus,  32 
N.  .7.  Law.  90. 

4T  Lester  v.  Given,  8  Bush  (Ky.)  357;  AMES  v.  MERIAM.  98  Mass.  204; 
First  Nat.  Bank  v.  Harris,  108  Mass.  514;  London  &  C.  Bank  v.  Groome.  8  Q. 
B.  Dlv.  288;   Estcs  v.  Shoe  Co.,  59  Minn.  504,  61  N.  W.  «74. 

48  Lancaster  Bank  v.  Woodward.  18  Pa.  St,  357. 

40  FIRST  NAT.  BANK  v.  NEEDHAM.  29  Iowa.  2-19.  Contra.  BULL  y. 
BANK.  123  U.  S.  105.  8  Sup.  Ct  U2;  Senell  v.  Railway,  9  0.  B.  811  (2  mouths). 
NEG.BILLS.— 27 


418  CHECKS.  (Ch.  10 

RIGHTS  OF  HOLDER  AGAINST  BANK. 

155.  By  the  "weight  of  authority,  though  there  are  de- 
cisions to  the  contrary,  -which  are  controlling  in  the  par- 
ticular jurisdictions,  the  holder  of  a  check  has  no  right  of 
action  against  the  bank  on  which  it  is  dra-wn  for  refusal 
to  pay  it,  unless  the  bank  has  assumed  an  obligation  to 
him  by  certifying  or  accepting  it ;  his  only  remedy  in  such 
a  case  being  against  the  drawer,  and  against  the  indors- 
ers,  if  there  are  any. 

It  would  seem  that  there  Is  no  privity  of  contract  between  the 
payee  or  holder  of  a  check  and  the  bank  upon  which  it  is  drawn, 
and,  therefore,  that  the  payee  or  holder  cannot  maintain  an  action 
at  law  against  the  bank  on  its  refusal  to  honor  the  check,  unless 
the  bank  has  expressly,  or  by  its  conduct,  assumed  an  obligation 
to  him;  but  there  is  upon  this  question  a  direct  conflict  in  the  au- 
thorities. Some  of  the  courts  have  held  that  the  check  is  an  equi- 
table assignment  of  the  amount  in  the  hands  of  the  banker  to  the 
payee  or  holder,  and  that  there  is  an  implied  contract  between  the 
bank  and  the  holder,  so  as  to  render  the  bank  liable  to  the  latter 
on  its  refusal  to  pay  the  check."*  By  the  weight  of  authority, 
however,  and,  it  would  seem,  on  principle,  there  is  no  assignment, 
nor  privity  of  contract,  and  the  bank  is  not  liable  to  the  holder  of 
an  uncertified  and  unaccepted  check,  either  at  law  or  in  equity. 
His  remedy  is  against  the  drawer,  and  to  the  drawer  only  is  the 
bank  liable  if  its  refusal  to  pay  was  a  breach  of  its  contract.  In 
an  English  case  it  was  held  that  the  holder  of  an  uncertified  check 
could  not  maintain  an  action  at  law  against  the  bank  under  a 
statute  allowing  the  assignee  of  a  chose  in  action  to  sue  thereon  in 

••  Fogartles  r.  State  Bank,  12  Rich.  Law  (S.  C.)  518;  Roberts  v.  Corbln,  20 
Iowa,  315;  Munn  v.  Burch,  25  111.  35;  Fourth  Nat  Bank  of  Chicago  v.  City 
Nat  Bank  of  Grand  Rapids,  68  111.  398;  Union  Nat  Bank  v.  Oceana  Co. 
Bank.  80  IlL  212;  National  Bank  of  America  v.  Indiana  Banking  Co.,  114 
lU.  483,  2  N.  E.  401;  Lester  v.  Given,  8  Bush  (Ky.)  357;  Welnstock  v.  Bell- 
wood,  12  Bush  (Ky.)  139;  McGrade  v.  German  Sav.  Inst,  4  Mo.  App.  330; 
Zeller  r.  Geroaan  Say.  Inst,  Id.  401;  Seuter  t.  Continental  Bank,  7  Mo.  App. 

&a2. 


§  156)  CERTIFICATION    AND    ACCEPTANCB   OF   CHECKa.  419 

his  own  name  at  law.  "The  bank,"  it  was  said,  "has  made  a  con- 
tract with  the  drawer  that  they  will  honor  his  cheeks  to  the 
amount  of  his  account.  They  break  that  contract  How  can  that 
give  a  right  of  action  to  a  third  person?  The  check  is  but  an  order 
to  pay,  and  not  an  absolute  assignment  of  anything."  »*  In  Hopkin- 
son  V.  Forster  "  it  was  held  that  the  bank  is  not  liable  to  the  holder 
in  equity.  "A  check  is  clearly  not  an  assignment  of  money  in  the 
hands  of  a  banker;  it  is  a  bill  of  exchange  payable  at  a  banker's. 
The  banker  is  bound  by  his  contract  with  his  customer  to  honor 
the  check,  when  he  has  sufficient  assets  in  his  hands.  If  he  does 
not  fulfill  his  contract,  he  is  liable  to  an  action  by  the  drawer,  in 
which  heavy  damages  may  be  recovered  if  the  drawer's  credit  has 
been  injured.  I  do  not  understand  the  expressions  attributed  to 
Mr.  Justice  Byles  in  the  case  of  Keene  v.  Beard,  but  I  am  quite 
sure  that  learned  judge  never  meant  to  lay  down  that  a  banker 
who  dishonors  a  check  is  liable  to  a  suit  in  equity  by  the  holder."  •** 

CERTinCATION  AND  ACCEPTANCB  OP  CHECKS. 

156.  By  certifying:  a  check  to  be  good,  the  bank  assumes 
an  unconditional  obligation  to  the  holder  presenting  it, 
and  to  every  subsequent  holder,  to  pay  it  on  demand;  and 

»i  Schroeder  v.  Central  Bank,  34  Law  T.  (N.  S.)  735,  per  Brett,  J.  And  see 
Gibson  v.  Cooke,  20  Pick.  (Mass.)  15;  Bullard  y.  Randall,  1  Gray  (Mn-s.) 
605;  Dana  v,  Boston  Third  Nat  Bank.  13  Allen  (Mass.)  448;  National  Bank 
T.  Millard,  10  WalL  152;  First  Nat.  Bank  v.  Whitman,  94  U.  S.  343;  Chap- 
man V.  White.  6  N.  Y.  412;  Aetna  Nat.  Bank  v.  Fourth  Nat  Bank.  46  N.  Y. 
82;  Tyler  v.  Gould,  48  N.  Y.  682;  ATTORNEY  GENERAL  v.  CONTINETAL 
LIFE  INS.  CO..  71  N.  Y.  325;  SECOND  NAT.  BANK  V.  WILLIAMS.  13  Mi(  h. 
282;  Creveling  v.  Bloomsbury  Nat  Bank,  46  N.  J.  Law,  255;  Loyd  v.  Mc- 
Caffrey. 46  Pa.  St  410;  First  Nat  Bank  v.  Gish.  72  Pa.  St  13;  Moses  v. 
Franklin  Bank,  34  Md.  574;  National  Commercial  Bank  v.  Miller,  77  Ala.  Ui8; 
St  John  V.  Homans,  8  Mo.  383;  Case  v.  Henderson,  23  La,  Ann.  49;  Colorado 
Nat  Bank  v.  Boettcher,  6  Colo.  185;  Northern  Trust  Co.  v.  Rogers.  (50  Minn. 
208,  62  N.  W.  273.  Such  is  the  provision  of  Nog.  Inst.  L.  §  .'i2.">.  But,  If  the 
parties  so  agree,  the  transaction  will  have  the  effect  of  an  equitable  asdiga- 
ment     Fourth  St.  Nat  Bank  v.  Yardley.  165  U.  S.  634,  17  Sup.  Ct  439. 

62  L.  R.  19  Eq.  74. 

■«  HopkiDsou  T.  Forster.  L.  R.  19  Eq.  74. 


420  cnRCKS.  (Ch.  10 

this  obligation  may  be  enforced  by  the  holder  against  the 
bank.  And  a  delay  in  presentment  •will  not  discharge  the 
obligation. 

157.  The  certification  of  a  check  at  the  instance  of  the 
holder  discharges  the  drawer  and  indorsers  from  liability, 
but  the  dra-wer  is  not  discharged  -vsrhere  he  himself  has  it 
certified,  and  puts  it  in  circulation.  The  drawer  will  also 
be  discharged  if  the  holder  takes  the  parol  acceptance  of 
the  bank  instead  of  payment. 

158.  Where  the  drawer  of  a  check  has  no  funds  in  a 
bank  and  the  bank  verbally  promises  the  holder  to  honor 
the  check,  this,  it  has  been  held  (though  there  are  de- 
cisions apparently  to  the  contrary),  is  a  mere  parol  promise 
to  answ^er  for  the  debt  of  another,  within  the  statute  of 
frauds,  and  cannot  be  enforced.  But  such  a  promise 
■wrhere  the  bank  has  funds  of  the  drawer,  whether  ex- 
press or  implied,  is  clearly  binding  as  a  promise  to  pay 
its  own  debt. 

159.  Where  a  bank  pays  a  check  to  a  holder  under  an 
unauthorized  indorsement,  and  charges  the  amount  to  the 
account  of  the  draw^er,  it  is  liable  for  the  amount  of  the 
check  to  the  true  holder  on  demand.  The  action,  it  would 
seem,  should  be  brought,  not  on  the  check,  but  on  the 
promise  implied  in  law  from  its  receipt  of  the  money 
from  the  drawer  for  the  true  holder's  use. 

Certified  Checks — LiahiUty  of  Batik. 

A  certified  check  is  a  check  which  the  bank  on  which  It  is  drawn 
has  certified  to  be  good,  for  the  purpose  of  assuring  the  holders  of 
it  that  it  will  be  paid  when  presented.  No  particular  form  of 
words  is  necessary.  All  that  is  required  is  that  it  shall  clearly 
appear  that  a  certification  is  intended.  A  bank,  by  certifying  a 
check  as  good,  estops  itself,  as  against  a  bona  fide  holder,  to  deny 
that  it  was  valid  as  a  draft  upon  the  funds  of  the  drawer,  and  would 
not,  for  instance,  be  allowed  to  say  that  it  was  made  payable  to  no 


§§  156-159)       CERTIFICATION    AND    ACCEPTANCE    OF    CHECKS.  421 

one,  and  therefore  void,  for  it  would  be  held  payable  to  bearer;'^ 
nor  would  it  be  allowed  to  dispute  the  genuineness  of  the  drawer's 
signature,  as  against  a  bona  fide  holder,^®  or  the  sufficiency  of 
funds  in  its  hands  to  pay  it."'  In  reason  it  would  seem  that  the 
certification  of  a  check  is,  as  regards  a  bona  fide  holder,  an  abso- 
lute promise  that  the  check  will  be  paid  on  demand.*  It  has  been 
held  in  Xew  York,  however,  that  the  certification  only  estops  the 
bank  from  denying  that  the  signature  is  genuine,  and  that  there  are 
sufficient  funds,  leaving  it  free  to  dispute  the  genuineness  of  the 
body  of  the  check  as  to  the  amount  or  as  to  the  payee.^*  If  the 
officer  or  employ^  of  a  bank,  whose  regular  duty  it  is  to  certify 
the  checks  drawn  upon  it,  certifies  a  check  in  excess  of  his  authority, 
the  certification  will  nevertheless  bind  the  bank  as  against  a  bona 
fide  holder  of  the  check.  This,  however,  is  a  question  of  the  law 
of  agency."'-^ 

The  effect  of  the  certification  of  a  check  by  the  bank  upon  which 
It  is  drawn  is  not  merely  a  declaration  of  the  fact  that  the  maker 
has  sufficient  fundd  to  his  credit  to  pay  it;  but  it  is  more.  It  cre- 
ates a  new  and  binding  obligation  on  the  part  of  the  bank.  It 
is  an  appropriation  of  the  funds  of  the  drawer,  to  the  amount  of 
the  check,  to  its  payment,  and  an  unconditional  promise  by  the 
bank  to  make  the  payment  on  demand.  This  promise  the  bank 
impliedly  makes  to  every  subsequent  holder  of  the  check,  and  it 
may  be  enforced  by  him  in  an  action  against  the  bank.**     In  this 

6  5  WILLETS  V.  BANK.  2  Duer  (N.  Y.)  121. 

8«  Farmers'  &  Mechanics'  Bank  v.  Butchers'  &  Drovers'  Bank.  16  N.  Y.  125; 
Commercial  &  Farmers'  Nat.  Bank  v.  First  Nat.  Bank,  30  Md.  11. 

6T  ESPY  V.  BANK.  18  Wall.  621. 

*  LOUISIANA  NAT.  BANK  v.  CITIZENS'  BANK,  1  Ames,  Cases,  601,  28 
La.  Ann.  IS!). 

68  MARINE  NAT.  BANK  v.  NATIONAL  CITY  BANK.  59  N.  Y.  67. 

»»  Farmers'  &  Mechanics'  Bank  v.  Butchers'  &  Drovers'  Bank.  14  N.  T. 
623,  16  N.  Y,  12."j;  Meads  v.  Merchants'  Bank,  2r>  N.  Y.  143;  Cooke  v.  State 
Nat.  Bank,  52  N.  Y.  106;  MERCHANTS'  BANK  v.  STATE  BANK.  10  Wall.  604. 
It  is  otlicrwise  if  the  officer  or  employe  has  no  authority  to  certify  chocks.  Pope 
V.  Bank  of  Albion,  57  N.  Y.  126;    Mussey  v.  Eagle  Bank,  9  Mete.  (Mass.)  306. 

«o  This  was  held  In  WILLETS  v.  BANK.  2  Duor  (N.  Y.)  121.  and  many  other 
cases  may  be  cited  to  the  same  effect.  See  National  Coininercial  Hank  v. 
Miller.  77  Ala.  168;  Florence  Min.  Co.  v.  Brown,  124  U.  S.  :«d.  8  Sup.  Ct.  531; 
IjiHcde  Bank  v.  Schuler.  120  U.  S.  .Ml,  7  Sup.  Ct.  614;  MEU( 'HANTS'  NAT. 
BANK  V.  STATE  NAT.  BANK,  10  Wail.  604;   Farmers'  &  M.  Bank  v.  Butchers' 


422  CHECKS.  (Ch.  10 

respect,  as  we  have  seen,  an  uncertified  check  is  on  a  different 
footing.  i 

Delay  in  presenting  a  certified  checls  does  not  discliarge  the  bank 
from  its  obligation.  "The  obligation  of  the  bank  is  simple  and 
unconditional  to  pay  upon  demand;  and  in  all  such  cases  the  de- 
mand may  be  made  whenever  it  suits  the  convenience  of  the  party 
entitled  to  the  stipulated  payment.  When  the  business  of  a  bank 
is  properly  conducted,  it  is  not  possible  that  it  can  sustain  any 
loss  or  prejudice  from  this  interpretation  of  its  contract, — the  con- 
tract which  it  makes  in  certifying  a  check;  and  it  is  only  where 
delay  may  be  prejudicial  that  the  want  of  due  diligence  may  be 
legally  imputed;  and  operate  as  a  bar  to  a  claim  otherwise  valid. 
•  •  •  There  is  in  reality,  in  good  sense,  no  distinction,  in  the  na- 
ture of  the  liability  created,  between  a  certified  check  and  a  note 
of  the  bank  payable  on  demand.  Each  is  intended  to  circulate  as 
money,  each  is  an  absolute  promise  to  pay  a  specific  sum  upon  de- 
mand, and  laches  in  making  the  demand  is  no  more  imputable  in 
the  one  case  than  in  the  other.  The  only  difference  between  them 
is  that  the  promise  which  in  the  note  is  expressed  in  the  check  is 
implied."" 

Discharge  of  Drawer  and  Indorsera  by  Certification  or  Acceptance  of  Chech 
The  certification  of  a  check  at  the  instance  of  the  holder  operate* 
as  a  discharge  of  the  drawer  from  his  liability,  the  holder's  only 
remedy  thereafter  being  against  the  bank;  and  in  like  manner  it 
will  operate  as  a  discharge  of  prior  indorsers,  who,  as  to  the  holder, 
occupy  the  same  position  as  the  drawer.  It  is  otherwise,  however, 
if  the  drawer  himself  has  a  check  certified  and  puts  it  in  circulation. 
In  such  a  case  he  remains  also  liable,  unless  there  is  some  agree- 
ment to  the  contrary.  That  certification  at  the  instance  of  the 
holder  discharges  the  drawer  was  held  in  FIRST  NAT.  BANK  v. 
LEACH."*     The  theory  of  the  law,  it  was  there  explained,  is  that, 

&  D.  Bank,  14  N.  Y.  623,  16  N.  T.  125;  Glrard  Bank  v.  Bank  of  Penn  Tp.,  39 
Pa.  St.  92;  Meads  v.  Merchants'  Bank,  25  N.  Y.  143;  Andrews  v.  German  Nat. 
Bank,  9  Heisk.  (Tenn.)  211;  Mussey  v.  Eagle  Bank,  9  Mete.  (Mass.)  306.  See 
Neg.  Inst.  L.  §  323. 

•  1  WILLETS  v.  BANK,  2  Duer  (N.  Y.)  121.     And  see  the  cases  above  cited. 

•  a  52  N.  Y.  350.  To  the  same  effect,  see  Metropolitan  Nat.  Bank  of  Chicago 
T.  Jones,   137  IlL  634,  27  N.  E.  533;    CONTINENTAL  NAT.   BANK  v.  M. 


§§  156-159)       CERTIFICATION    AND    ACCEPTANCE    OP   CHECKS.  423 

where  a  check  is  certified  to  be  good  by  the  bank  upon  which  it  is 
drawn,  the  amount  thereof  is  then  charged  to  the  account  of  the 
drawer.  Every  well-regulated  bank  adopts  this  practice  to  protect 
itself,  and  the  reason  therefor  is  so  strong  that  the  law  presumes  it  is 
adopted  by  the  banks.  It  follows  that  after  a  check  is  certified  the 
drawer  of  the  check  cannot  draw  out  the  funds  in  the  bank  necessary 
to  meet  the  certified  check.  The  money  is  no  longer  his.  If  he  ap- 
prehended danger  from  the  suspected  failure  of  the  bank,  he  could 
not  draw  out  that  money,  because  it  has  already  been  appropriated 
by  means  of  the  check  thus  certified.  As  to  him,  it  is  precisely 
as  if  the  bank  had  paid  the  money  on  the  check,  instead  of  cer- 
tifying it.  This,  it  is  true,  applies  also  to  the  acceptance  of  a  time 
bill  of  exchange  before  it  is  due.  When  the  drawee  accepts,  it 
is  an  appropriation  of  the  funds  pro  tanto  for  the  service  and  use 
of  the  payee  or  holder  of  the  bill,  so  that  the  money  ceases  hence- 
forth to  be  the  money  of  the  drawer,  and  becomes  that  of  the  payee 
or  holder  in  the  hands  of  the  acceptor.  Yet  the  acceptance  of  a 
time  bill  of  exchange  before  due  does  not  discharge  the  drawer. 
Its  only  effect  is  to  make  the  acceptor  the  primary  party  to  pay 
it.  The  parties  to  a  certified  check,  however,  due  when  certified, 
occupy  a  different  position.  There  the  money  is  due  and  payable 
when  the  check  is  certified,  and  the  holder  of  the  check,  instead  of 
taking  it  when  he  may,  leaves  it  with  the  bank,  and  instead  takes 
the  bank's  certificate  that  it  is  good,  and  its  promise  to  pay  it  on 
demand.  The  law  will  not  permit  a  check,  when  due,  to  be  thus 
presented,  and  the  money  to  be  left  with  the  bank  for  the  accom- 
modation of  the  holder,  thus  changing  the  position  and  increasing 
the  risk  of  the  drawer,  without  discharging  him.  If  the  holder, 
therefore,  chooses  to  have  the  check  certified  instead  of  paid,  he  dis- 
charges the  di'awer,  and  his  only  remedy  is  against  the  bank." 

CORNHAUSER  &  CO.,  37  111.  App.  475;  BORN  v.  BANK,  123  Ind.  78.  24  N. 
E.  173;  Essex  Co.  Nat.  Bank  v.  Bank  of  Montreal,  7  Biss.  193,  Fed.  Gas.  No. 
4,532;  First  Nat  Bank  of  Washington  v.  Whitman,  94  U.  S.  343.  345;  National 
Commercial  Bank  v.  IMiller,  77  Ala.  1G8.     See  Neg.  Inst.  L.  §  324. 

•  »  FIRST  NAT.  BANK  OF  JERSEY  CITY  v.  LEACH.  52  N.  Y.  350;  Freund 
V.  Importers'  &  T.  Nat.  Bank,  76  N.  Y.  352;  MINOT  v.  RUSS,  15(i  Mass.  458, 
ai  N.  E.  489;  Rounds  v.  Smith.  42  111.  245;  BROWN  v.  LECKIE,  43  III.  497; 
Andrews  v.  Bank,  9  Helsk.  (Tenn.)  211;  LARSKN  v.  BUEENE,  12  Colo.  480, 
21  Pac.  498;    Mutual  Nat.  Bauli.  v.  Rolye,  •J.H  La.  Ann.  933.     Nor  is  an   In- 


424  CHECKS.  (Ch.  10 

Tlip  rule  doos  not  apply  wliere  the  drawer  hfraself  causes  the 
check  to  be  cortiiied,  and  then  puts  it  in  circuhition.  In  such  a 
case  the  reason  for  the  rule  does  not  apply,  and  he  also  remains 
liable." 

The  same  ia  true  where  the  holder  of  a  check  takes  the  parol  ac- 
ceptance of  the  bank  instead  of  payment.  If  the  payee  or  holder  of 
a  check  presents  the  check,  and  the  bank  offers  to  pay  it,  he  cannot, 
instead  of  taking  the  money,  leave  it  with  the  bank,  without  doing 
so  at  his  own  risk.  If  the  bank  fails,  the  drawer  is  discharged,  and 
it  makes  no  difference  that  the  check  was  presented  on  the  same  day 
it  was  received,  and  the  bank  suspended  soon  afterwards,  and  re- 
fused payment,  when  the  check  was  again  presented  on  the  same 
day.  He  might,  it  is  true,  have  waited  until  the  next  day  to  present 
the  check,  without  being  chargeable  with  laches,  but  having  pre- 
sented it  earlier,  and  having  refused  to  receive  payment  when  of- 
fered, he  cannot  hold  the  drawer.'* 
Verbal  Acceptance  or  Promise  by  Bank  to  Pay  Checlc, 

A  bank  may  render  itself  liable  to  the  holder  of  a  check  otherwise 
than  by  a  certification  of  it  It  may  under  some  circumstances  ren- 
der itself  liable  by  a  verbal  acceptance,  and  a  promise,  express  or 
implied  from  acceptance,  to  pay  it;  and  under  some  circumstances 
an  acceptance  and  promise  may  be  implied  from  its  conduct.  K  the 
drawer  of  a  check  has  no  funds  in  the  bank,  and  the  bank  verbally 
promises  the  holder  to  honor  the  check,  it  would  seem  clear  that 
this  is  a  mere  parol  promise  to  answer  for  the  debt  of  the  drawer, 

dorser  discharged  where  he  himself  procures  a  check  to  be  certified,  and  then 
transfers  it.     Mutual  Nat.  Bank  v.  Rotge,  supra. 

8  4  FIRST  NAT.  BANK  OF  JERSEY  CITY  v.  LEACH,  supra;  MINOT  v. 
RUSS,  supra.  "When  a  check  payable  to  another  person  than  the  drawer  is 
presented  by  the  drawer  to  the  bank  for  certification,  the  bank  knows  that  it 
has  not  been  negotiated,  and  that  it  is  not  presented  for  payment,  but  that  the 
drawer  wishes  the  obligation  of  the  bank  to  pay  it  to  the  holder  when  it  is 
negotiated,  in  addition  to  his  owti  obligation.  But,  when  the  payee  or  holder 
of  a  check  presents  it  for  certification,  the  bank  l<nows  that  this  is  done  for 
the  convenience  or  security  of  the  holder.  The  holder  could  demand  payment 
If  he  chose,  and  it  is  only  because,  instead  of  payment,  the  holder  desires  cer- 
tification, that  the  bank  certifies  the  check  instead  of  paying  it.  In  one  case 
the  bank  certifies  the  check  for  the  use  or  convenience  of  the  drawer,  and  in 
the  other  for  the  use  or  convenience  of  the  holder."     MINOT  v.  RUSS,  supra. 

86  Simpson  v.  Pacific  Mut.  Lite  Ins.  Co.,  44  Cal.  13U. 


§§  156-159)      CERTIFICATION    AND    ACCEPTANCE    OF    CHECKS.  425 

and,  under  the  section  of  the  statute  of  frauds  requiring  a  promise 
to  answer  for  the  debt  of  another  to  be  in  writing,  not  enforceable 
against  the  bank.  In  MORSE  v.  MASSACHUSETTS  NAT.  BANK," 
a  bank  in  which  the  drawer  of  checks  upon  it  had  no  funds  had  ver- 
bally promised  the  holder  to  pay  the  checks,  if  deposited  in  some 
other  bank,  and  presented  through  the  clearing  house.  It  was  held 
that  this  was  a  mere  parol  promise  to  pay  another's  debt,  within  the 
statute  of  frauds,  and  that  the  holder,  therefore,  acquired  no  right 
against  the  bank.  And  it  was  held  that  the  reasons  for  holding 
good  a  parol  accommodation  acceptance  of  a  bill  of  exchange  do  not 
apply  to  the  case  of  a  bank  check.  There  are  cases,  however,  ap- 
parently sustaining  the  proposition  that  parol  acceptances  of  checks 
by  the  bank  may  be  enforced  without  regard  to  whether  the  bank 
has  funds  of  the  drawer. 

If  the  bank  has  funds  of  the  drawer,  and  verbally  accepts  the 
check,  and  promises  the  holder,  expressly  or  impliedly,  by  such  ac- 
ceptance, to  pay  it,  the  leaving  of  the  funds  with  the  bank  instead 
of  withdrawing  them  is  a  sufficient  consideration  to  support  the 
promise;  and  the  promise,  being  to  pay  the  promisor's  (the  bank's) 
own  debt  (that  is,  the  debt  it  owes  to  the  drawer),  is  not  within  the 
statute  of  frauds.  The  holder  can  therefore  maintain  an  action 
against  the  bank  on  such  a  promise.®^ 

A  bank  is  entitled  to  a  reasonable  time  in  which  to  ascertain 
whether  the  drawer's  signature  is  genuine,  and  whether  he  has  suffi- 
cient funds  to  meet  the  check,  and  its  retention  of  the  check  for  such 
a  time  cannot  be  construed  as  an  acceptance  of  the  check  and  prom- 
ise to  piy  it.'*  But  if  it  retains  a  check  for  an  unreasonable  time, 
it  runs  the  risk  of  being  held  to  have  impliedly  accepted  the  check 
BO  as  to  become  liable  to  the  holder  to  pay  it'* 

««  1  Holmes,  209,   Fed.   Cas.   No.  9.857. 

•  7  See  tbe  cases  hereafter  cited.  ESPY  v.  BANK,  18  Wall.  621;  ^SIASON 
v.  DOUSAY,  35  111.  424;   BANK  OF  RUTLAND    v.  WOODRUFF,  34  Vt.  89. 

«8  Boyd  V.  Emmerson,  2  Adol.  &  E.  184;  Overman  v.  Hoboken  City  Bank, 
31  N.  J.  Law,  5(>3. 

«»  First  Nat.  Bank  v.  McMichael,  100  Pa.  St.  4W.  In  New  York  It  has  hocn 
held  tliat  a  bank  is  bound  to  know  the  state  of  its  depositor's  acfouiit  im- 
mediately upon  presentation  of  his  check.  Oddle  v.  National  City  Buuk,  45 
N.  Y.  73a. 


426  CHECKS.  (Ch.  10 

Payment  on  Unauthorized  Indorsement. 

Where  a  bank  pays  a  check  to  a  holder  under  an  unauthorized 
indorsement,  and  charges  the  check  to  the  account  of  the  drawer, 
it  has  been  held,  though  there  is  a  decision  to  the  contrary,^"  that 
it  is  liable  for  the  amount  of  the  check  to  the  true  holder  on  demand. 

The  action,  however,  it  is  submitted,  should  properly  be  brought, 
not  on  the  check,  but  for  money  had  and  received, — that  is,  on  the 
promise  implied  in  law  from  the  receipt  by  the  bank  of  the  amount 
of  the  check  from  tlie  drawer  for  the  use  of  the  true  holder.  In 
BANK  OF  TIIE  REPUBLIC  v.  MILLARD,"  where  the  court  held 
that  the  true  holder  of  a  check  paid  to  another  under  a  forged  in- 
dorsement cannot  sue  the  bank  for  refusing  payment  to  him,  in  the 
absence  of  proof  that  it  was  accepted  by  the  bank  or  charged  against 
the  drawer,  it  was  said:  "It  may  be,  if  it  could  be  shown  that  the 
bank  had  charged  the  check  on  its  books  against  the  drawer,  and  set- 
tled with  him  on  that  basis,  that  the  jjlaintiff  could  recover  on  the 
count  for  money  had  and  received,  on  the  ground  that  the  rule  ex 
aequo  et  bono  would  be  applicable,  as  the  bank,  having  assented  to 
the  order,  and  communicated  its  assent  to  the  drawer,  would  be  con- 
sidered as  holding  the  money  thus  appropriated  for  the  plaintiff's 
use,  and  therefore  under  an  implied  promise  to  him  to  pay  it  on  de- 
mand." In  SEVENTH  NAT.  BANK  y.  COOK,"  the  supreme  court 
of  Pennsylvania,  purporting  to  apply  the  principle  above  stated,  held 
that  the  payment  of  a  check  to  the  holder  under  an  unauthorized  in- 
dorsement, the  check  being  charged  to  the  account  of  the  maker, 
amounts  to  an  acceptance,  and  binds  the  bank  to  pay  the  true  holder 
on  presentment.  It  was  said  in  this  case  that  "it  is,  in  fact,  an  ac- 
ceptance, and  binds  the  bank  as  a  certified  check  does.  It  is  tanta- 
mount to  an  acceptance  of  a  draft."  It  does  not  seem  right  to  base 
this  decision  on  the  ground  that  the  check  is  accepted  or  certified  by 
the  bank,  though  the  court  seems  to  have  done  so,  losing  sight,  it 
seems,  of  the  principle  stated  in  BANK  OF  THE  REPUBLIC  v.  MII^ 
LARD,  upon  which  it  relied.  There  was  in  fact  no  certification  of 
the  check,  nor  any  acceptance  of  it  by  the  bank  on  presentment 

TO  First  Nat  Bank  v.  Whitman,  94  U.  S.  343. 
71  10  Wall.  152. 

T2  73  Pa.  St.  483.     See.  also.  DODGE  v.  BANK,  20  Ohio  St.  234,  30  Ohio 
St   1;    Vaubibber  v.   Louisiana  Banli,  14  La.  Ann.  481, 


§  160)  FAILURE    OF   BANK   TO   HONOR   CHECK.  427 

which  could  be  construed  as  a  promise  in  fact  to  the  true  holder  to 
pay  the  check.  The  action  should  not  be  on  the  theory  that  the 
bank  has  certified  the  check,  but  should  be  on  the  theory  that,  hav- 
ing retained  the  money  in  settling  with  the  drawer  of  the  check,  it 
holds  the  same  for  the  use  of  the  true  holder  of  the  check,  the  ac- 
tion being  on  the  promise  created  by  law  for  money  had  and  re- 
ceived. 

FAILURE  OF  BANK  TO  HONOR  CHECK. 

160.  A  bank  having  funds  of  a  depositor  is  bound  to 
honor  his  checks  to  the  amount  of  those  funds,  and,  for  a 
failure  to  do  so,  is  liable  for  damages.  The  bank,  how- 
ever, must  have  had  a  reasonable  time  since  the  deposit 
in  -which  to  make  proper  entries  on  its  books  so  as  to 
shoTv  the  amount  to  the  depositor's  credit. 

When  a  bank  receives  funds  on  deposit  it  impliedly  contracts  with 
the  depositor  that  it  will  pay  checks  drawn  by  him  to  the  amount  of 
the  deposit,  and  a  failure  to  honor  his  check  when  there  are  suffi- 
cient funds  to  his  credit  is  not  only  a  breach  of  contract,  but  a  tort  as 
well,  entitling  the  depositor  to  recover  any  damage  he  may  have  sus- 
tained, and  to  recover  nominal  damages,  at  least,  if  no  actual  dam- 
age has  been  sustained/'  Of  course,  the  check  must  be  drawn 
properly,  so  as  to  raise  a  duty  on  the  part  of  the  bank  to  pay  it^* 

T»  It  was  so  held  In  MARZETTI  v.  WILLIAMS,  1  Barn.  &  Adol.  415.  And 
see  Rolin  v.  Steward,  14  0.  B.  595;  Whitaker  v.  Bank  of  England,  1  Cromp., 
M.  &  R.  744;  Patterson  v.  Marine  Nat.  Bank,  130  Pa.  St.  419,  18  Atl.  632; 
Gray  v.  Johnston,  L.  R.  3  H.  L.  1;  National  Mahaiwe  Bank  v.  Peck,  127 
Mass.  298.  The  rule  also  applies  to  notes  and  acceptances  of  a  depositor 
made  payable  at  the  bank.  Whitaker  v.  Bank  of  England,  1  Cromp.,  M.  & 
R.  744;  ROBARTS  v.  TUCKER,  16  Q.  B.  560.  It  Is  not  necessary  to  allege 
and  prove  special  damages,  at  least  If  the  form  of  action  be  tort,  but  the 
plaintiff  may  recover  general  compensatory  damages.  Schaffner  v.  Ehrman, 
139  111.  100,  28  N.  E.  917;  Bank  of  Commerce  v.  Goos,  39  Neb.  437.  58  N.  W. 
84;  Patterson  v.  Bank,  130  Pa.  St.  419,  18  Atl.  632;  ATLANTA  NAT.  BANK 
V.  DAVIS,  96  Ga.  334,  23  S.  E.  190;  Svendsen  v.  Bank,  64  Minn.  40,  65  N.  W, 
1086. 

1*  A  bank  is  not  bound  to  honor  a  check  drawn  on  one  of  its  brnnohos  by  a 
depositor  In  another  branch.  Woodland  v.  Fear,  7  EL  &  BL  519;  Gray  v.  John- 
ston, L.  R.  3  IL  L.  L 


428  CHECKS.  (Ch.  10 

To  render  a  bank  liable  for  failure  to  honor  a  elieck,  the  depositor 
must  have  had  a  right  to  draw  the  money.  A  bank  may  refuse  to 
honor  a  check  if  there  are  not  sufficient  funds  to  the  credit  of  the 
depositor,  after  offsetting  a  balance  of  account  due  from  him  to  the 
bank."  And  there  must  be  a  sufficient  balance  to  pay  the  check 
in  full,  for  the  bank  cannot  be  required  to  make  a  part  payment 
The  duty  and  authority  of  a  bank  to  pay  a  check  drawn  on  it  by  a 
depositor  are  determined  by  countermand  of  payment,"  or  by  notice 
of  the  drawer's  death." 

It  is  only  reasonable  that,  after  a  deposit  is  made,  the  bank  should 
be  allowed  a  reasonable  time  in  which  to  enter  the  credit  on  its 
books,  so  that  the  clerk  whose  duty  it  is  to  pay  checks  may  know  the 
amount  to  the  drawer's  credit  If  a  deposit  were  made  with  one 
clerk,  and  a  check  immediately  presented  to  another,  before  he  could 
have  time  to  know  of  the  deposit,  the  bank  would  not  be  liable  for 
failure  to  honor  the  check.  But  if  a  reasonable  time  has  elapsed 
between  the  deposit  and  presentation  of  the  check  the  bank  will  be 
liable,  notwithstanding  the  fact  that  the  credit  was  not  entered,  for 
it  must  keep  proper  books,  and  conduct  its  business  in  a  proper  man- 
ner.^' 

TBGarnett  v.  McKewan,  L.  R.  8  Exch.  10;  Schuler  v.  Israel  Bank,  120  U. 
S.  50G,  7  Sup.  Ct.  648.  This  applies  where  the  balance  against  the  depositor 
is  at  another  branch  of  the  bank.    Garnett  v.  McKewan,  supra. 

T«  See  COHEN  v.  HALE,  3  Q.  B.  Div.  371;  McLean  v.  Clydesdale  Banking 
Co.,  9  App.  Cas.  95. 

77  Rogerson  v.  Ladbroke,  1  Bing.  93.  Such  is  the  provision  of  the  English 
Bills  of  Exchange  Act  (section  75).  It  Is  said  that  the  Negotiable  Instru- 
ments  Law  in  its  original  draft  contained  the  following:  "The  death  of 
the  drawer  does  not  operate  as  a  revocation  of  the  authority  of  the  bank 
to  pay  a  check  if  the  check  is  presented  for  payment  within  ten  days  from 
the  date  thereof;"  but  that  this  was  struck  out  of  the  final  draft.  The  pro- 
posed provision  was  taken  from  Pub.  St.  Mass.  Supp.  1888,  c.  210.  See 
HufCcut,  Neg.  Inst  80.  Mr.  Daniel  maintains  that  the  idea  that  death 
operates  as  a  revocation  is  a  total  misconception  of  the  law.  Daniel,  Neg. 
Inst.  §  lG18b. 

78  This  was  in  effect  held  in  MARZinTI  v.  WILLIAMS,  supra.  In  that 
case  a  depositor  on  the  17th  of  the  month,  when  he  had  £G9  to  his  credit  in 
a  bank,  drew  a  check  of  that  date  for  £87.  At  11  o'clock  on  the  19th  a 
deposit  of  £40  was  made.  At  3  o'clock  on  the  19th  the  check  was  presented 
and  payment  refused.  The  judge  held  that  a  bank  who  received  a  sum  of 
money  belonging  to  his  customer  became  his  debtor  the  moment  he  received 


§  100)  FAILURE  OF  BANK  TO  HONOR  CHECK.  429 

It,  and  was  bound  to  pay  a  check  drawn  by  such  customer  after  the  lapse 
of  a  such  a  reasonable  time  as  would  afford  an  opportunity  to  the  different 
persons  in  his  establishment  of  knowing  the  fact  of  the  receipt  of  such 
money,  and  directed  the  jury  to  find  against  the  banker  if  they  were  of 
opinion  that  such  a  reasonable  time  had  intervened  between  the  receipt 
of  the  money  at  11  o'clock  and  the  presentment  of  the  check  at  3.  The 
court  said  that  it  could  not  be  expected  if  a  sum  of  money  was  paid  to  a 
clerk  in  a  large  banking  office,  and  immediately  afterwards  a  check  presented 
to  another  clerk  in  a  different  part  of  the  office,  that  the  latter  should  be 
immediately  acquainted  with  the  fact  of  the  deposit,  but  a  reasonable  time 
should  be  allowed  for  that  purpose,  and  he  told  the  jury  that  they  should 
consider  whether  the  banker  ought  or  ought  not,  between  11  and  3  o'clock, 
to  have  had  in  some  book  an  entry  of  deposit  which  would  have  informed 
all  the  clerks  of  the  state  of  the  account.  The  jury  found  against  the 
bank,  and  the  verdict  was  sustained.  See,  also,  Whitaker  >.  Bank  of  Eng- 
land, supra. 


APPENDIX. 


THE  NEGOTIABLE  INSTRUMENTS  LAW. 


Following  the  example  of  Great  Britain,  which  in  1882  enacted  the 
Bills  of  Exchange  Aet,^  many  of  the  states  of  the  Union  have  enact- 
ed the  so-called  Negotiable  Instruments  Law.  The  English  act  was 
based  upon  the  Digest  of  Judge  Chalmers,  and  is  for  the  most  part 
a  codification  of  the  law  relating  to  bills,  notes,  and  checks.  The 
history  of  the  American  act  is  as  follows:  In  1895  in  many  of  the 
states  were  passed  acts  providing  for  the  appointment  of  "Commis- 
sioners for  the  Promotion  of  Uniformity  of  Legislation  in  the  United 
States";  and  at  a  conference  of  commissioners  from  nineteen  states, 
held  in  that  year,  was  adopted  a  resolution  requesting  the  commit- 
tee on  commercial  laws  to  procure  a  draft  of  a  bill  relating  to  com- 
mercial paper,  based  on  the  English  statute,  and  on  such  other  sources 
of  information  as  the  committee  might  deem  proper  to  consult.  The 
committee  appointed  a  sub-committee,  which  employed  Mr.  John  J. 
Crawford,  of  New  York  City,  to  make  a  draft.  Upon  the  comple- 
tion of  the  draft  by  Mr.  Crawford,  it  was  revised  by  the  sub-com- 
mittee, and  was  then  submitted  to  a  conference  of  the  commission- 
ers, which  included  representatives  of  fourteen  states;  and,  with 
certain  amendments,  was  adopted  by  the  commissioners.  The  final 
draft,  with  slight  changes  in  some  states,  has  already  become  law  in 
fifteen  states  and  in  the  District  of  Columbia.  The  law  is  in  the 
main  declaratory  in  its  effect,  but  makes  a  few  changes,  and  nec- 
essarily changes  the  law  in  some  jurisdictions  on  points  concerning 
which  a  confiict  of  laws  has  existed.* 

1  45  &  46  Vict.  c.  61.  See  Introduction  to  Chalm.  Dig.  Bills  Exoh.  (3d  Ed.). 
The  act  is  found  in  the  Digest,  and  also  In  Rand.  Com.  Taper,  p.  21'S7,  and  in 
Huffcut,  Neg.   Inst.  p.  87. 

«  See  preface  to  Crawford's  Annotated  Negotiable  Instruments  Law;  Huff- 
cut,  Neg.  Inst.  pp.  117-127.  Few  cases  involving  the  constriKtlon  of  the  Ne- 
gotiable Instruments  Law  have  as  yet  arisen.  On  this  point  consult  Clmliu. 
Dig.  Bills  Exch.,  Preface,  supra;  BANK  OF  ENOLAND  v.  VACLIA.XO, 
[1891]  App.  Cas.  107,  144,  per  Lord  Herschcll;  IJi:WIS  v.  CT-\Y.  42  .s<.l.  .T. 
151,  per  Ix)rd  Russell.  Both  cases  are  found  In  Prof.  IlullVut's  valunltle 
book,  which  should  be  consulted  by  the  student  of  the  AmcricHu  law.  See, 
also,  Brewster  v.  Shruder,  57  N.  Y.  Supp.  GOG,  2G  Misc.  Rey.  450. 

NEG.BILLS.  (431) 


THE  NEGOTIABLE  INSTRUMENTS  LAW. 

(AS  ADOPTED  IN   NEW  YORK.) 


(Thfs  art  hns  bpen  adopted,  with  the  chancres  Indicated  In  the  notes.  In 
Coloindo,  Laws  l.S!>7.  c.  04;  Connecticut,  Laws  1S97,  c.  74;  District  of  Colum- 
bia, Uiws  1811!)  (U.  S.)  c.  47;  Florida,  Laws  1897,  c.  4524;  Maryland.  Laws 
lS!t8.  c.  119:  Massachusetts,  Laws  1S98,  c.  583;  New  York,  Laws  1897.  c. 
612.  as  auicndf'd  by  Laws  1898,  c.  33G;  North  Carolina,  I.aws  1899,  c.  733: 
North  Dakota,  Laws  1899,  c.  113;  Oregon,  Laws  1899,  p.  18;  Rhode  Island,  Laws 
1899,  c.  ('.74;  Tennessee.  Laws  1899,  c.  94;  Utah,  Laws  1899,  c.  S3;  Virginia, 
Laws  189,8.  c.  8(i(i;  Washington,  Laws  1899,  c.  149;  and  Wisconsin,  Laws  1899. 
c.  3.'(J.  Tiie  text  of  tlie  law  as  printed  here  Is  that  of  the  New  York  act,  such 
modifications  and  additions  as  have  been  made  by  other  states  being  Indicated 
In  tlie  notes  following  the  sections. 

[The  section  numbers  in  parentheses,  except  under  article  1,  are  those  of 
Ooloiado.  Connecticut,  District  of  Columbia.  Florida,  Massachusetts,  North 
Carolina,  North  Dakota,  Oregon,  Tennessee,  Utah,  Virginia,  and  Washington. 
The  section  numbers  in  parentheses  under  article  1  are  those  of  Colorado, 
Massachusetts,  North  Carolina,  North  Dakota,  Utah,  Virginia,  and  Washington. 
The  section  numbers  in  the  other  states  are  indicated  In  the  footnotes.] 

THE    NEGOTIABLE   INSTRUMENTS    LAW. 

Article  I.     General  Provisions.     (§§  1-7.) 

IL     Form  and  Interpretation  of  Negotiable  Instruments,     (§§  20-42.) 
II L     Consideration.     (§§  50-55.) 
IV.     Negotiation.     (§§  60-«0.) 
V,    Rights  of  Holder.     (§§  90-98.) 
VI.     Liabilities  of  Parties.     (§§  110-119.) 
VII.     Presentment  for  Payment.     (§§  130-148.) 
VIII.     Notice  of  Dishonor.     (§§  160-189.) 
IX.     Discharge  of  Negotiable  Instruments.     (§§  200-206.) 

X.    Bills  of  Exchange— Form  and  Interpretation.    (§?  210-215.) 
XI.     Acceptance.     (§§  220-230.) 
XII.     Presentment  for  Acceptance.     (§§  240-248.) 
XIIL     Protest     (§§  260-2G8.) 
XIV.     Acceptance  for  Honor.     (§§  280-289.) 
XV.     Payment  for  Honor.     (§§  300-306.) 
XVL     Bills  in  a  Set     (§§  310-315.) 
XVIL     Promissory  Notes  and  Checks.     (§§  320-325.) 
XVIII.     Kotes  Given  for  a  Patent  Right  and  for  a  Speculative  Considera- 
tion.    (§§  330-332.) 
XIX.     Laws  Repealed,  When  to  Take  Effect     (§§  340,  341.)     [These  sec- 
tions vary  In  the  different  states  which  have  enacted  this  stat- 
ute, and  are  tlierefore  not  printed  here.] 
NEG.BILLS.  (432) 


GENERAL   PROVISIONS.  433 

ARTICLE  I.» 

GENERAX,  PROVISIONS, 

Section    1.  Short  Title. 

2.  Definitions  and  Meaning  of  Terms. 

3.  Persons  Primarily  Liable  on  Instrument, 

4.  Reasonable  Time,  What  Constitutes. 

5.  Time,  How  Computed;  When  Last  Day  Falls  on  Holiday, 

6.  Application  of  Chapter. 

7.  Rule  of  Law  Merchant;  When  Governs. 

Section  1  (190).     ShoH  Title. 

This  act  shall  be  known  as  the  Negotiable  Instruments  Law. 
Sec.  2  (191).     Definitions  and  Meaning  of  Terms. 

In  this  act,  unless  the  context  otherwise  requires: 

"Acceptance"  means  an  acceptance  completed  bj  delivery  or  noti- 
fication. 

"Action"  includes  counter-claim  and  set-off. 

"Bank"  includes  any  person  or  association  of  persons  carrying  on 
the  business  of  banking,  whether  incorporated  or  not 

"Bearer"  means  the  person  in  possession  of  a  bill  or  note  which  is 
payable  to  bearer. 

"Bill"  means  bill  of  exchange,  and  "note"  means  negotiable  promis- 
sory note. 

"Delivery"  means  transfer  of  possession,  actual  or  constructive, 
from  one  person  to  another. 

"Holder"  means  the  payee  or  indorsee  of  a  bill  or  note  who  is  in 
possession  of  it,  or  the  bearer  thereof. 

"Indorsement"  means  an  indorsement  completed  by  delivery, 

"Instrument"  means  negotiable  instrument. 

"Issue"  means  the  first  delivery  of  the  instrument,  complete  in  form, 
to  a  person  who  takes  it  as  a  holder. 

"Person"  includes  a  body  of  persons,  whether  incorporated  or  not 

"^^alue"  means  valuable  consideration. 

"Written"  includes  printed,  and  "writing"  includes  print 

«  §§  190-190.  Colo.,  Mass..  N.  C,  N.  D.,  Utah,  Va.,  and  Wash.;    §J  1^19, 
Md.;   §§  190-192.  Or.;    §8  1-7,  R.  L;   S  1<^T5,  Wis.;   no  section  numbers  Conn., 
D.   0.,    Fla.,  and  Teun. 
NEG.B1LLS.-28 


434  THE   NKQOTIABLK    INSTRUMENTS    LAW. 

Bee.  3  (192).     Person  Primarity  Liable  on  Instrumerd, 

The  person  "primarily"  liable  on  an  Instrument  is  the  person  who 
by  the  terms  of  the  instrument  is  absolutely  required  to  pay  the 
same.    All  other  parties  are  "secondarily"  liable; 

Sec.  4  (193).     Reasonable  Time,   What  Consiitutea, 

In  determining  what  is  a  "reasonable  time"  or  an  "unreasonable 
time"  regard  is  to  be  had  to  the  nature  of  the  instrument,  the  usage 
of  trade  or  business  (if  any)  with  respect  to  such  instruments,  and 
the  facts  of  the  particular  case. 

Sec.  5  (194).     Time,  How    Computed;  When  Last   Day   Falls  on 
Holiday. 

Where  the  day,  or  the  last  day,  for  doing  any  act  herein  required 
or  permitted  to  be  done  falls  on  Sunday  or  on  a  holiday,  the  act  may 
be  done  on  the  next  succeeding  secular  or  business  day- 
Sec.  6  (195).     Application  of  Chapter. 

The  provisions  of  this  act  do  not  apply  to  negotiable  instruments 
made  and  delivered  prior  to  the  passage  hereof. 

6«c.  7  (196).     Law  Merchant;  When  Governs. 

In  any  case  not  provided  for  in  this  act  the  rules  of  the  law  mer- 
chant shall  gevern. 


rOBM    AND   INTERPRETATION.  435 

ARTICLE  n." 

rORM  AND  INTERPRETATION. 

Section    20.  Form  of  Negotiable  Instrument 

21.  Certainty  as  to  Sum;  What  Constltuteau 

22.  When  Promise  Is  Unconditional. 

23.  Determinable  Future  Time;  What  Constitutes. 

24.  Additional  Provisions  not  Affecting  NegoUability« 

25.  Omissions;   Seal;  Particular  Money, 

26.  When  Payable  on  Demand. 

27.  When  Payable  to  Order. 

28.  When  Payable  to  Bearer. 

29.  Terms,  When  Sufficient. 

80.  Date,  Presumption  as  to. 

81.  Ante-Dated  and  Post-Dated. 

82.  When  Date  May  be  Inserted. 

83.  Blanks,  When  May  be  Filled. 

84.  Incomplete  Instrument  not  Dellverefl. 

85.  Delivery;  When  Effectual;  When  Presumed. 

86.  Construction  where  Instrument  is  Ambiguous. 

87.  Liability  of  Persons  Signing  in  Trade  or  Assumed  Name. 

88.  Signature  by  Agent;    Authority;    How  Shown. 

89.  Liability  of  Person  Signing  as  Agent,  etc. 

40.  Signature  by  Procuration;  Effect  of. 

41.  Effect  of  Indorsement  by  Infant  or  Corporation. 

42.  Forged  Signature;  Effect  of. 

Sec.  20  (1).     Form  of  Negotiable  Instrument. 

An  instrument  to  be  negotiable  must  conform  to  the  following  re- 
quirements: 

1.  It  must  be  in  writing  (a)  and  signed  by  the  maker  or  drawer; 

2.  Must  contain  an  unconditional  promise  or  order  (b)  to  pay  a 
sum  certain  (c)  in  money; 

3.  Must  be  payable  on  demand  (d),  or  at  a  fixed  or  determinable 
future  time  (e); 

4.  Must  be  payable  to  order  (f)  or  to  bearer  (g);  and 

5.  Where  the  instrument  is  addressed  to  a  drawee,  he  must  be 
named  or  otherwise  indicated  therein  with  reasonable  ceitaiuiy.  (h) 

(a)  See  8  2  (191)  "written."  (c)  See  §  21  (2). 

(b)  See  I  22  (3).  (d)  See  §  20  (7). 

(e)  See   8   23   (4). 

«  S9  1-23.  Colo.,  Conn.,  D.  C,  Fla,,  Mass.,  N.  C,  N.  D..  Or..  Tenn..  Utah, 
Va.,  and  Wash.;  88  20-42,  Md.;   68  9-31.  R.  I.;   8S  1075-1  to  1075-23,  Wis. 


436  THE    NKQOTIABLE    INSTRUMENTS    LAW. 

(f>  See  I  27  (S).  The  North  Carolina  act  (j  1)  reads:  "Must  be  payable  to 
the  order  of  a  specified  person  or  to  bearer." 

(g)  See  f  28  (9). 

(h)  See  i  210  (12G).  The  Wisconsin  act  (f  1675-1)  adds:  "But  no  order 
drawn  upon  or  accepted  by  the  treasurer  of  any  county,  town,  city,  village 
or  school  district,  whether  drawn  by  any  officer  thereof  or  any  other  person, 
and  no  obligation  nor  instrument  made  by  any  such  corporation  or  any  offi- 
cer thereof,  unless  expressly  authorized  by  law  to  be  made  negotiable,  shall 
be,  or  shall  be  deemed  to  be,  negotiable  according  to  the  custom  of  mer- 
chants, In  whatever  form  they  may  be  drawn  or  made.  Warehouse  re- 
ceipts, bills  of  lading  and  railroad  receipts  upon  the  face  of  which  the  words 
'Not  negotiable'  shall  not  be  plainly  written,  printed  or  stamped,  shall  be 
negotiable  as  provide''.  In  section  1(376  of  the  Wisconsin  Statutes  of  1878,  and 
In  sections  4194  and  4425  of  these  statutes,  as  the  same  have  been  con- 
Btrued  by  the  supreme  court** 

Sec.  21  (2).     Certainty  as  to  Sum;    What  Constitutes* 

The  sum  payable  is  a  sum  certain  within  the  meaning  of  this  act, 
although  it  is  to  be  paid: 

1.  With  interest;   or 

2.  By  stated  installments;  or 

3.  By  stated  installments,  with  a  provision  that  upon  default  in 
payment  of  any  installment  or  of  interest  (a),  the  whole  shall  become 
due;  or . 

4.  With  exchange,  whether  at  a  fixed  rate  or  at  the  current  rate; 
or 

5.  With  costs  of  collection  or  an  attorney's  fee,  in  case  payment 
shall  not  be  made  at  maturity,  (b) 

(a)  The  North  Carolina  act  (§  2)  omits:    "Or  of  Interest.** 

(b)  See  section  197  of  the  North  Carolina  act.    Section  24,  note  (a),  post. 

Sec.  22  (3).      WJien  Promise  is  Unconditional. 

An  unqualified  order  or  promise  to  pay  is  unconditional  within 
the  meaning  of  this  act,  though  coupled  with: 

L  An  indication  of  a  particular  fund  out  of  which  reimbursement 
is  to  be  made,  or  a  particular  account  is  to  be  debited  with  the 
amount;  or 

2.  A  statement  of  the  transaction  which  gives  rise  to  the  instru- 
ment . 

But  an  order  or  promises  to  pay  out  of  a  particular  fund  is  not  un- 
conditional. 


FORM    AND    INTERPRETATION.  437 

Sec.  23  (4).     Determinable  Future  Time;    What  Constitutes. 

An  instrument  is  payable  at  a  determinable  future  time,  within 
the  meaning  of  this  act,  which  is  expressed  to  be  payable: 

1.  At  a  fixed  period  after  date  or  sight;  or 

2.  On  or  before  a  fixed  or  determinable  future  time  specified  there- 
in; or 

3.  On  or  at  a  fixed  period  after  the  occurrence  of  a  specified  event, 
which  is  certain  to  happen,  though  the  time  of  happening  be  uncer- 
tain. 

An  instrument  payable  upon  a  contingency  is  not  negotiable,  and 
the  happening  of  the  event  does  not  cure  the  defect,  (a) 

(a)  The  Wisconsin  act  (|  1675-4)  substitutes,  for  the  last  paragraph,  the 
following:  "4.  At  a  fixed  period  after  date  or  sight,  though  payable  before 
then  on  a  contingency.  An  Instrument  payable  upon  a  contingency  is  not 
negotiable,  and  the  happening  of  the  event  does  not  cure  the  defect,  except 
as  herein  provided." 

Sec.  24  (5).     Additional  Provisions  not  Affecting  Negotiability, 

An  instrument  which  contains  an  order  or  promise  to  do  any  act 
in  addition  to  the  payment  of  money  is  not  negotiable.  But  the  ne- 
gotiable character  of  an  instrument  otherwise  negotiable  is  not  af- 
fected by  a  provision  which: 

1.  Authorizes  the  sale  of  collateral  securities  in  case  the  instru- 
ment be  not  paid  at  maturity;  or 

2.  Authorizes  a  confession  of  judgment  if  the  instrument  be  not 
paid  at  maturity  (a);  or 

3.  Waives  the  benefit  of  any  law  intended  for  the  advantage  or 
protection  of  the  obligor  (b);  or 

4.  Gives  the  holder  an  election  to  require  something  to  be  done 
in  lieu  of  payment  of  money. 

But  nothing  in  this  section  shall  validate  any  provision  or  stipu- 
lation otherwise  illegal,  (c) 

(a)  The  North  Carolina  act  (§  197)  contains  the  following:  "That  nothing 
in  this  act  shall  autliorize  the  enforcement  of  an  authorization  to  confess  Judg- 
ment or  a  waiver  of  homestead  or  personal  property  exemptions  or  a  provlsloa 
to  pay  counsel  fees  for  collection  Incorporated  in  any  Instrument  mentioned 
In  this  act;  but  the  mention  of  such  provision  In  such  instrument  siiall  not 
affect  the  other  terms  of  such  Instrumeuts  or  the  negotiability  thereof." 

(b)  See  note  (a),  supra, 

(c)  The  Wisconsin  act  (§  1075-5)  adds:  "or  authorize  the  waiver  of  ex- 
emptions from  executiuo." 


438  THE    NEGOTIABLE    INSTRUMENTS    LAW. 

Sec.  25  (6),      Omissions;  Seal;  Particular  Money, 

The  validity  and  Degotiable  character  of  an  instrument  are  not 
affected  by  the  fact  that: 

1.  It  is  not  dated  (a);   or 

2.  Does  not  specify  the  value  given,  or  that  any  value  has  been 
given  therefor;    or 

3.  Does  not  specify  the  place  where  it  is  drawn  or  the  place  who* 
it  is  payable;  or 

4.  Bears  a  seal;   or 

5.  Designates  a  particular  kind  of  current  money  in  which  pay- 
ment is  to  be  made. 

But  nothing  in  this  section  shall  alter  or  repeal  any  statute  re- 
quiring in  certain  cases  the  nature  of  the  consideration  to  be  stated 
it  ih?  instrument,  (b) 

(a)  See  §  32  (13). 

(b)  Soe  §§  330,  SSL 

Sec.  26  (7).      When  Payable  on  Demand, 
An  instrument  is  payable  on  demand: 

1.  When  it  is  expressed  to  be  payable  on  demand,  or  at  sight,  or 
OA  presentation;    or 

2.  In  which  no  time  for  payment  is  expressed. 

"Where  an  instrument  is  issued,  accepted  or  indorsed  when  overdue, 
St  is,  a&  regards  the  person  so  issuing,  accepting  or  indorsing  it, 
payable  on  demand. 

Sec.  27  (3).      When  Payable  to  Order. 

The  instrument  is  payable  to  order  where  it  is  drawn  payable  to 
the  order  of  a  specified  person  or  to  him  or  his  order.  It  may  be 
drawn  payable  to  the  order  of: 

1.  A  payee  who  is  not  maker,  drawer  or  drawee;  or 

2.  The  drawer  (a)  or  maker;  or 
8.  The  drawee;  or 

4.  Two  or  more  payees  jointly;   or 

5.  One  or  some  of  several  payees;    or 

6.  The  holder  of  an  ofiBce  for  the  time  being: 

'V\'here  the  instrument  is  payable  to  order  the  payee  must  be 
named  or  otherwise  indicated  therein  with  reasonable  certainty. 
(a)  "Drawee"  by  mistake  in  original  New  Yorlt  act. 


FORM    AND    INTERPRETATION.  439 

Sec.  28  (9).      When  Payable  to  Bearer. 
The  instrument  is  payable  to  bearer: 

1.  When  it  is  expressed  to  be  so  payable;  or 

2.  When  it  is  payable  to  a  person  named  therein  or  bearer;  or 

8.  When  it  is  payable  to  the  order  of  a  fictitious  or  nonexisting  per- 
son, and  such  fact  was  known  to  the  person  making  it  so  payable;  or 

4.  When  the  name  of  the  payee  does  not  purport  to  be  the  name 
of  any  person ;  or 

5.  When  the  only  or  last  indorsement  is  an  indorsement  in 
blank,  (a) 

(a)  See  §  64  (34). 

Sec.  29  (10).     Terms,    When  Sufficient, 

The  instrument  need  not  follow  the  language  of  this  act,  but  any 
terms  are  sufiBcient  which  clearly  indicate  an  intention  to  conform 
to  the  requirements  hereof,  (a) 

(a)  The  Wisconsin  act  (§  1675-10)  adds:  "Memoranda  upon  the  face  or 
back  of  the  instrument,  "whether  signed  or  not,  material  to  the  contract,  if 
made  at  the  time  of  delivery,  are  part  of  the  Instrument,  and  parol  evidence 
is  admissible  to  show  the  circumstances  imder  which  they  were  made.** 

Sec.  30  (11).     Date,  Presumption,  as  to. 

Where  the  instrument  or  an  acceptance  or  any  indorsement  there- 
on is  dated,  such  date  is  deemed  prima  facie  to  be  the  true  date  of 
the  making,  drawing,  acceptance  or  indorsement,  as  the  case  may  be. 

Sec.  31  (12).     Ante-Dated  amd  Post-Dated. 

The  instrument  is  not  invalid  for  the  reason  only  that  it  is  ante- 
dated or  post-dated,  provided  this  is  not  done  for  an  illegal  or  fraud- 
ulent purpose.  The  person  to  whom  an  instrument  so  dated  is  de- 
livered acquires  the  title  thereto  as  of  the  date  of  delivery. 

Sec.  32  (13).      WJien  Date  May  he  Inserted. 

Where  an  instrument  expressed  to  be  payable  at  a  fixed  period 
after  date  is  issued  undated,  or  "where  the  acceptance  of  an  instru- 
ment payable  at  a  fixed  period  after  sight  is  undated,  any  holder 
may  insert  therein  the  true  date  of  issue  or  acceptance,  and  the  in- 
strument shall  be  payable  accordingly.  The  insertion  of  a  wrong 
date  does  not  void  the  instrument  in  the  hands  of  a  snbscqm'nt  liold- 
er  in  due  course;  but  as  to  him,  the  date  so  inserted  is  to  be  re- 
garded as  the  true  date,  (a) 

(a)  See  §  33  (14). 


440  THE    NEGOTIABLE    INSTRUMENTS    LAW. 

Sec  33  (14).     Blank's,    When  May  he  Filled. 

TVTiere  the  instrument  is  wanting  in  any  material  particular,  the 
person  in  possession  thereof  has  a  prima  facie  authority  to  complete 
it  (a)  by  filling  up  the  blanks  therein.  And  a  signature  on  a  blank 
paper  delivered  by.  the  person  making  the  signature  in  order  that 
the  paper  may  be  converted  into  a  negotiable  instrument  operates  as 
a  i)rin)a  facie  authority  (b)  to  fill  it  up  as  such  for  any  amount.  In 
order,  however,  that  any  such  instrument,  when  completed,  may  be 
enforced  against  any  person  who  became  a  party  thereto  prior  to  its 
completion,  it  must  be  filled  up  strictly  in  accordance  with  the  au- 
thority ^iven  and  within  a  reasonable  time.  But  if  any  such  instru- 
ment, after  completion,  is  negotiated  to  a  holder  in  due  course,  it  is 
valid  and  effectual  for  all  purposes  in  his  hands,  and  he  may  enforce 
it  as  if  it  had  been  filled  up  strictly  in  accordance  with  the  authority 
given  and  within  a  reasonable  time,  (c) 

(a)  The  Wisconsin  act  (5  1675-14)  reads,  "complete  It  prior  to  negotiation 
by  filling."  etc. 

(b)  The  Wisconsin  act  reads,  "operates  as  an  authority,"  etc 

(c)  See  §§  205  (124),  206  (125). 

Sec.  34  (15).     Incomplete  Instrument  not  Delivered, 

Where  an  incomplete  instrument  has  not  been  delivered  it  will 
not,  if  completed  and  negotiated,  without  authority,  be  a  valid  con- 
tract in  the  hands  of  any  holder,  as  against  any  person  whose  signa- 
ture was  placed  thereon  before  delivery. 

Sec.  35  (16).     Delivery;    When  Effectual;    When  Presumed. 

Every  contract  on  a  negotiable  instrument  is  incomplete  and  rev- 
ocable until  delivery  of  the  instrument  for  the  purpose  of  giving 
effect  thereto.  As  between  immediate  parties,  and  as  regards  a 
remote  party  other  than  a  holder  in  due  course,  the  delivery,  in 
order  to  be  effectual,  must  be  made  either  by  or  under  the  authority 
of  the  party  making,  drawing,  accepting  (a)  or  indorsing,  as  the  case 
may  be;  and  in  such  case  the  delivery  may  be  shown  to  have  been 
conditional,  or  for  a  special  purpose  only,  and  not  for  the  purpose  of 
transferring  the  property  in  the  instrument.  l>ut  where  the  instru- 
ment is  in  the  hands  of  a  holder  in  due  course,  a  valid  delivery  there- 
of by  all  parties  prior  to  him  so  as  to  make  them  liable  to  him  is  con- 
clusively presumed,  (b)  And  where  the  instrument  is  no  longer  in 
the  possession  of  a  party  whose  signature  appears  thereon,  a  valid 


FORM    AND   INTERPRET ATIOK.  441 

and  intentional  delivery  by  him  is  presumed  until  the  contrary  is 
proved. , 

(a)  The  North  Carolina  act  (J  16)  omits  "accepting." 

(b)  See  §  34  (15). 

Bee.  36  (17).     Construction  where  Instrument  i»  Ambiguous. 

Where  the  language  of  the  instrument  is  ambiguous,  or  there  are 
omissions  therein,  the  following  rules  of  construction  apply: 

1.  Where  the  sum  payable  is  expressed  in  words  and  also  in  fig- 
ures and  there  is  a  discrepancy  between  the  two,  the  sum  denoted 
by  the  words  is  the  sum  payable;  but  if  the  words  are  ambiguous 
or  uncertain,  references  may  be  had  to  the  figures  to  fix  the  amount; 

2.  Where  the  instrument  provides  for  the  payment  of  interest, 
without  specifying  the  date  from  which  interest  is  to  run,  the  interest 
runs  from  the  date  of  the  instrument,  and  if  the  instrument  is  un- 
dated, from  the  issue  thereof; 

3.  Where  the  instrument  is  not  dated,  it  will  be  considered  to 
be  dated  as  of  the  time  it  was  issued; 

4.  Where  there  is  a  conflict  between  the  written  and  printed  pro- 
yisions  of  the  instrument,  the  written  provisions  prevail; 

5.  Where  the  instrument  is  so  ambiguous  that  there  is  doubt 
whether  it  is  a  bill  or  note,  the  holder  may  treat  it  as  either  at  his 
election; 

6.  Where  a  signature  Is  so  placed  upon  the  Instrument  that  it 
is  not  clear  in  what  capacity  the  person  making  the  same  intended 
to  sign,  he  is  to  be  deemed  an  indorser;  (a) 

7.  Where  an  instrument  containing  the  words  '1  promise  to  pay" 
is  signed  by  two  or  more  persons,  they  are  deemed  to  be  jointly  and 
severally  liable  thereon, 

(a)  See  §  114  (64). 

[NOTE,  The  Wisconsin  act  (5  1675-17)  adds:  *'8.  Where  several  writings 
are  executed  at  or  about  the  same  time,  as  parts  of  the  same  trausaftiou. 
Intended  to  accomplish  the  same  object,  they  may  be  construed  as  one  and 
the  same  Instrument  as  to  all  parties  having  notice  thereof."] 

Sec.  37  (18).     Liability  of  Person  Signing  i/n    Trade  or  Assumed 
Name. 
No  person  is  liable  on  the  instnimont  wliose  signature  does  not 
appear  thereon,  except  as  Leieiu  olheivviae  expressly  provided,  (a) 


442  THE    NEGOTIABLE   INSTRUMENTS    LAW. 

But  one  who  signs  in  a  trade  or  assumed  name  will  be  liable  to  the 
same  extent  as  if  he  had  signed  in  his  own  name, 
(a)  See  §  72  (42). 

Sec.  38  (19).     Signature  by  Agent;  Authority;  How  STioion, 

The  signature  of  any  party  may  be  made  by  a  duly  authorized 
agent  No  particular  form  of  appointment  is  necessary  for  this  pur- 
pose; and  the  authority  of  the  agent  may  be  established  as  in  other 
cases  of  agency^ 

Sec.  39  (20),     Liability  of  Person  Signing  as  Agent,  etc. 

Where  the  instrument  contains  or  a  person  adds  to  his  signature 
words  indicating  that  he  signs  for  or  on  behalf  of  a  principal,  or  in 
a  representative  capacity  (a),  he  is  not  liable  on  the  instrument  if  he 
was  duly  authorized;  but  the  mere  addition  of  words  describing 
him  as  an  agent,  or  as  filling  a  representative  character,  without  dis- 
closing his  principal,  does  not  exempt  him  from  personal  liability, 
(a)  The  Virginia  act  (§  20)  inserts  after  "capacity,"  "without  disclosing  his 
principal." 

Sec.  40  (21).     Signature  by  Procuration;  Effect  of. 

A  signature  by  "procuration"  operates  as  notice  that  the  agent 
has  but  a  limited  authority  to  sign,  and  the  principal  is  bound  only 
in  case  the  agent  in  so  signing  acted  within  the  actual  limits  of  his 
authority., 

Sec.  41  (22).     Effect  of  Indorsement  by  Infant  or  Corporation, 

The  indorsement  or  assignment  of  the  instrument  by  a  corporation 
or  by  an  infant  passes  the  property  therein,  notwithstanding  that 
from  want  of  capacity  the  corporation  or  infant  may  incur  no  lia- 
bility thereon. 

Sec.  42  (23).     Forged  Signature;  Effect  of. 

Where  a  signature  is  forged  or  made  without  authority  of  the 
person  whose  signature  it  purports  to  be,  it  is  wholly  inoperative, 
and  no  right  to  retain  the  instrument,  or  to  give  a  discharge  therefor, 
or  to  enforce  payment  thereof  against  any  party  thereto,  can  be 
acquired  through  or  under  such  signature,  unless  the  party  against 
whom  it  is  sought  to  enforce  such  right  is  precluded  from  setting 
up  the  forgery  or  want  of  authority. 


CONSIDERATION    OF   NEGOTIABLE    INSTRUMENTS.  443 

ARTICLE  ni.' 

CONSIDERATION  OF  NEGOTIABLE  INSTRUMENTS. 

Section    50.  Presumption  of  Consideration. 

51.  What  Constitutes  Consideration. 

52.  What  Constitutes  Holder  for  Value. 

53.  When  Lien  on  Instrument  Constitutes  Holder  for  Value, 

54.  Effect  of  Want  of  Consideration. 

55.  Liability  of  Accommodation  Indorser* 

Sec.  50  (24).     Presumption  of  Consideration, 

Every  negotiable  instrument  is  deemed  prima  facie  to  hare  been 
issued  for  a  valuable  consideration;  and  every  person  whose  signa- 
ture appears  thereon  to  have  become  a  party  thereto  for  value. 

Sec.  51  (25).     Consideration;    What  Constitutes. 

Value  is  any  consideration  sufficient  to  support  a  simple  contract. 
An  antecedent  or  pre-existing  debt  (a)  constitutes  value;  and  is 
deemed  such  whether  the  instrument  is  payable  on  demand  or  at  a 
future  time. 

(a)  The  Wisconsin  act  (§  1675-51)  inserts  after  "debt,"  "discharged,  extin- 
guished or  extended."  and  adds  at  the  end  of  the  section:  "But  the  indorse- 
ment or  delivery  of  negotiable  paper  as  collateral  security  for  a  pre-existing 
debt,  without  other  consideration,  and  not  in  pursuance  of  an  agreement  at 
the  time  of  delivery,  by  the  malier,  does  not  constitute  value." 

Sec.  62  (26).      What  Constitutes  Holder  for  Value. 

Where  value  has  at  any  time  been  given  for  the  instrument,  the 
holder  is  deemed  a  holder  for  value  in  respect  to  all  parties  who 
became  such  prior  to  that  time. 

Sec.  53  (27).      When  Lien  on  Instrument  Constitutes  Holder  for  Value. 

Where  the  holder  has  a  lien  on  the  instrument,  arising  either  from 
contract  or  by  implication  of  law,  he  is  deemed  a  holder  fur  value 
to  the  extent  of  his  lien. 
Sec.  54  (28).     Ffect  of  Want  of  Consideration. 

Absence  or  failure  of  consideration  is  matter  of  defense  as  against 
any  person  not  a  holder  in  due  course  (a);  and  partial  failure  of  con- 

»  §§  24-29,  Colo.,  Conn.,  D.  C.  Ha.,  M.iss.,  N.  Q,  N.  D..  Or..  Tenn..  TTtah.  Vu., 
and  Wash.;   §§  43-18,  Md.;    §§  31i--:J7.  K.  I.;   85  1075-50   to  1075-55,  Wis. 


444  THE    NEGOTIABLE   INSTRUMENTS    LAW. 

sideration  is  a  defense  pro  tanto  whether  the  failure  is  an  ascer- 
tained and  liciuidated  amount  or  otherwise, 
(a)  See  {  91  (52). 

Sec.  55  (29).     lAahility  of  Accommodation  Party, 

An  accommodation  party  is  one  who  has  signed  the  instrnment 
as  maker,  drawer,  acceptor  or  indorser,  without  receiving  value 
therefor,  and  for  the  purpose  of  lending  his  name  to  some  other  per- 
son. Such  a  person  is  liable  on  the  instrument  to  a  holder  for  value, 
notwithstanding  such  holder  at  the  time  of  taking  the  instrument 
knew  him  to  be  only  an  accommodation  party. 


NEGOTIATION.  445 

ARTICLE  IV.* 

NEGOTIATION. 

Section    60.  What  Constitutes  Negotiation, 

61.  Indorsement;   How  Made. 

62.  Indorsement  Must  be  of  Entire  Instrument, 

63.  Kinds  of  Indorsement. 

64.  Special  Indorsement;  Indorsement  In  Blank. 

65.  Blank  Indorsement;  How  Changed  to  Special  Indorsement, 

66.  When  Indorsement  Restrictive. 

67.  Effect  of  Restrictive  Indorsement;  Rights  of  Indorsee^ 

68.  Qualified  Indorsement 

69.  Conditional  Indorsement. 

70.  Indorsement  of  Instrument  Payable  to  Bearer. 

71.  Indorsement  when  Payable  to  Two  or  More  PersonsL 

72.  Effect  of  Instrument  Drawn  or  Indorsed  to  a  Person  as  Cashier. 

73.  Indorsement  where  Name  is  Misspelled,  et  cetera. 

74.  Indorsement  In  Representative  Capacity, 

75.  Time  of  Indorsement;  Presumption. 

76.  Place  of  Indorsement;  Presumption, 

77.  Continuation  of  Negotiable  Character. 

78.  Striking  Out  Indorsement. 

79.  Transfer  without  Indorsement;  Effect  of. 

80.  When  Prior  Party  may  Negotiate  Instrument 

Sec.  60  (30).      What  Constitutes  Negotiation. 

An  instrument  is  negotiated  when  it  is  transferred  from  one  per- 
Bon  to  another  in  such  manner  as  to  constitute  the  transferee  the 
holder  (a)  thereof.  If  payable  to  bearer  (b)  it  is  negotiated  by  de- 
livery; if  payable  to  order  (c)  it  is  negotiated  by  the  indorsement  of 
the  holder  completed  by  delivery. 

(a)  See  (  2  (101)  "holder." 

(b)  See  8  28  (9). 

(c)  See  S  27  (8). 

Sec.  61  (31).     Indorsement;  IIow  Made. 

The  indorsement  must  be  written  on  the  instrument  Itself  or  ujion 
a  paper  attached  thereto.  The  signature  of  the  indorser,  without 
additional  words,  is  a  sufllclent  iudorseinent. 

*{§  30-50.  Colo.,  Conn.,  D.  C,  Fla,,  Mass.,  N.  C,  N.  D.,  Or.,  Tcnn..  Utah, 
Va^  and  Wash.;   {S  40-09,  Md.;  §§  38-58  It.  I.;   §§  lliTO  to  1070-20,  Wis, 


446  THE    NEGOTIABLE    INSTRUMENTS    LAW. 

Sec.  62  (32).     Indorsement  Must  be  of  Entire  Instrument. 

The  indorsement  must  be  an  indorsement  of  the  entire  instrument. 
An  indorsement  which  purports  to  transfer  to  the  indorsee  a  part 
only  of  the  amount  payable,  or  which  purports  to  transfer  the  in- 
strument to  two  or  more  indorsees  severally,  does  not  operate  as  a 
negotiation  of  the  instrument.  But  where  the  instrument  has  been 
paid  in  part,  it  may  be  indorsed  as  to  the  residue. 

Sec.  63  (33).     Kinds  of  Indorsement. 

An  indorsement  may  be  either  special  or  in  blank;  and  it  may 
also  be  either  restrictive  or  qualified  or  conditional. 

Sec.  64  (34).     Special  Indorsement;  Indorsement  in  Blank. 

A  special  indorsement  specifies  the  person  to  whom,  or  to  whose 
order  the  instrument  is  to  be  payable;  and  the  indorsement  of  such 
indorsee  is  necessary  to  the  further  negotiation  of  the  instrument,  (a) 
An  indorsement  in  blank  specifies  no  indorsee,  and  an  instrument  so 
indorsed  is  payable  to  bearer,  and  may  be  negotiated  by  delivery,  (b) 

(a)  See  §§  27  (8),  70  (40). 

(b)  See  §  28  (9). 

Sec.  65  (35).     Blank  Indorsement;  How  Changed  to  Special  Indorsement. 
The  holder  may  convert  a  blank  indorsement  into  a  special  indorse- 
ment by  writit'g  ever  the  signature  of  the  indorser  in  blank  any  con- 
tract consistent  with  the  character  of  the  indorsement, 

Se-?..  66  (36).      When  Indorsement  Restrictive. 
An  indorsement  is  restrictive,  which  either: 

1.  Prohibits  the  further  negotiation  of  the  instrument;   or 

2.  Constitutes  the  indorsee  the  agent  of  the  indorser;   op 

3.  Vests  the  title  in  the  indorsee  in  trust  for  or  to  the  use  of  some 
other  person^ 

But  the  mere  absence  of  words  implying  power  to  negotiate  does 
not  make  an  indorsement  restrictive. 

Sec.  67  (37).     Effect  of  Restrictive  Indorsement;  li/ghts  of  Indorsee, 
A  restrictive  indorsement  confers  upon  the  indorsee  the  right: 

1.  To  receive  payment  of  the  instrument; 

2.  To  bring  any  action  thereon  that  the  indorser  could  bring; 

3.  To  transfer  his  rights  as  such  indorsee,  where  the  form  of  the 
indorsement  authorizes  him  to  do  so. 


NEGOTIATION.  447 

But  all  subsequent  indorsees  acquire  only  the  title  of  the  first  in- 
dorsee under  the  restrictive  indorsement. 

Sec.  68  (38).     Qualified  Indorsement. 

A  qualified  indorsement  constitutes  the  indorger  a  mere  assn'jrnor  of 
the  title  to  the  instrument.  It  may  be  made  by  adding  to  the  in- 
dorser's  signature  the  words  "without  recourse"  or  any  words  of 
similar  import.  Such  an  indorsement  does  not  impair  the  negotiable 
character  of  the  instrument,  (a) 

(a)  See  §  115  (65). 

Sec.  69  (39).      Conditional  Indorsement. 

Where  an  indorsement  is  conditional,  a  party  required  to  pay"fhe~ 
instrument  may  disregard  the  condition,  and  make  payment  to  the 
indorsee  or  his  transferee,  whether  the  condition  has  been  fulfilled 
or  not.  But  any  person  to  whom  an  instrument  so  indorsed  is  ne- 
gotiated, will  hold  the  same,  or  the  proceeds  thereof,  subject  to  the 
rights  of  the  person  indorsing  conditionally. 

Sec.  70  (40).     Indorsement  of  Instrument  Payable  to  Bearer. 

WTiere  an  instrument,  payable  to  bearer,  is  indorsed  specially,  it 
may  nevertheless  be  further  negotiated  by  delivery;  but  the  person 
indorsing  specially  is  liable  as  indorser  to  only  such  holders  as  make 
title  through  his  indorsement,  (a) 

(a)  See  §§  116  (66),  117  (67). 

Sec.  71  (41).     Indorsement  where  Payable  to  Two  or  More  Persons. 

Wliere  an  instrument  is  payable  to  the  order  of  two  or  more  payees 
or  (a)  indorsees  who  are  not  partners,  all  must  indorse,  unless  the 
one  indorsing  has  authority  to  indorse  for  the  others. 

(a)  The  Wisconsin  act  (§  1076-11)  Inserts  before  "indorsees,"  "Joint." 

Sec.  72  (42).  Effect  of  Instalment  Drawn  or  Indorsed  to  a  Per- 
son as  Cashier. 

Where  an  instrument  is  drawn  or  indorsed  to  a  person  as  "cash- 
ier" or  other  fiscal  officer  of  a  bank  or  corporation,  it  is  deemed  pri- 
ma facie  to  be  payable  to  the  bank  or  corporation  of  which  he  is 
such  otlicer;  and  may  be  negotiated  by  either  liie  indoiscincut  of 
the  bank  or  corporation,  or  the  indorsement  of  the  officer,  (u) 

(a)  See  S  37  (18). 


448  THE    NEGOTIABLB    IMSTKUMIKTl    LAW. 

Sec.  73  (43).     Indorsement  v}her«  Name  u  Misspelled^  et  cetera. 

WTiere  the  name  of  a  payee  or  indorsee  ia  wrongly  designated 
or  misspelled,  he  may  indorse  the  instrument  as  therein  described, 
adding,  if  he  think  fit,  his  proper  signature. 

See.  74  (44).     Indorsement  in  Representative  Capacity. 

\Miere  any  person  is  under  obligation  to  indorse  in  a  represent- 
ative capacity,  he  may  indorse  in  such  terms  as  to  negative  personal 
liability,  (a) 

(a)  See  §§  39  (20),  68  (38). 

Sec.  75  (45).     Time  of  Indorsement;  Presumption. 

Except  where  an  indorsement  bears  date  after  the  maturity  of  the 
instrument,  every  negotiation  is  deemed  prima  facie  to  have  been 
effected  before  the  instrument  was  overdue,  (a) 

(a)  See  §  91  (52). 

Sec.  76  (46).     Place  of  Indorsement;   Presumption. 

Except  where  the  contrary  appears  every  indorsement  is  presum- 
ed prima  facie  to  have  been  made  at  the  place  where  the  instrument 
is  dated. 

Sec.  77  (47).     Continuation  of  Negotiahls  Character. 

An  instrument  negotiable  in  its  origin  continues  to  be  negotia- 
ble until  it  has  been  restrictively  indorsed  (a)  or  discharged  by  pay- 
ment or  otherwise,  (b) . 

(a)  See  §§  66  (36).  67  (37). 

(b)  See  %  200  (119)  et  seq. 

Sec.  78  (48).     Striking  Out  Indorsement. 

The  holder  may  at  any  time  strike  out  any  indorsement  which  is 
not  necessary  to  his  title.  The  indorser  whose  indorsement  is  struck 
out,  and  all  indorsers  subsequent  to  him,  are  thereby  relieved  from 
liability  on  the  instrument. 

Sec.  79  (49).     Transfer  without  Indorsement;  Effect  of. 

Where  the  holder  of  an  instrument  payable  to  his  order  transfers 
it  for  value  without  indorsing  it,  the  transfer  vests  in  the  transferee 
such  title  as  the  transferer  had  therein,  and  the  transferee  acquires, 
in  addition,  the  right  to  have  the  indorsement  of  the  transferer,  (a) 
But  for  the  purpose  of  determining  whether  the  transferee  is  a  hold 


NEGOTIATION.  •449 

er  in  due  course,  the  negotiation  takes  effect  as  of  the  time  when 
the  indorsement  is  actually  made,  (b) 

(a)  The  Colorado-  act  (§  49)  Inserts  after  "transferer,"  "If  omitted  by  mis- 
take, accident  or  fraud." 

(b)  The  Wisconsin  act  (§  167&-19)  adds:  "When  the  Indorsement  was  omit- 
ted by  mistake,  or  there  was  an  agreement  to  endorse  made  at  the  time  of 
the  transfer,  the  Indorsement,  when  made,  relates  back  to  the  time  of 
transfer." 

Sec.  80  (50).      WTien  Prior  Party  may  Negotiate  Instrument, 

Where  an  instrument  is  negotiated  back  to  a  prior  party,  such 
party  may,  subject  to  the  provisions  of  this  act  (a),  reissue  and  fur- 
the  negotiate  the  same.  But  he  is  not  entitled  to  enforce  payment 
thereof  against  any  intervening  party  to  whom  he  waa  personally 
liable, 
(a)  See  §S  200  (119)-202  (121). 
NEG.BU^LS.— 29 


450  THE   MEaOTIABLB    INSTRUMENTS   LAW. 

ARTICLE  V.» 

RIGHTS  OF  HOLDER. 

Section    90.  R!ght  of  Holder  to  Sue;  Payment 

91.  What  Constitutes  a  Holder  In  Due  Courst. 

92.  When  Person  not  Deemed  Holder  in  Du©  CoUTBflL 

93.  Notice  before  Full  Amount  Paid. 
9^.  When  Title  Defective. 

95.  What  Constitutes  Notice  of  Defect. 

96.  Rights  of  Holder  in  Due  Course. 

97     When  Subject  to  Original  Defenses, 
98.     Who  Deemed  Holder  in  Due  Courseu 

See.  90  (51).     RigJit  of  Holder  to  Sue;  Payment. 

The  holder  of  a  negotiable  instrument  may  sne  thereon  In  his 
own  name  (a),  and  payment  to  him  in  due  course  discharges  the  in- 
strument, (b) 

(a)  See  §  67  (37),  subd.  2. 

(b,  Se.&  §5  148  (88).  200  (119). 

Sec.  9i  (5?/).      Whai  Constitutes  a  Holder  in  Due  Cowirse, 

A  holder  \'i\  due  course  is  a  holder  who  has  taken  the  instrument 
under  the  following  conditions: 

1.  That  it  is  complete  and  regular  upon  its  face;  (a) 

2.  That  he  became  the  holder  of  it  before  it  was  overdue,  and  with- 
out notice  that  it  had  been  previously  dishonored,  if  such  was  the 
fact; 

3.  That  he  took  it  in  good  faith  and  for  value;  (b) 

4.  That  at  the  time  it  was  negotiated  to  him  he  had  no  notice  of 
any  infirmity  in  the  instrument  or  defect  in  the  title  of  the  person 
negotiating  it.  (c) 

(a)  See  §§  32  (13).  33  (14). 

(b)  See  §  51  (25). 

(c)  See  §  95  (50). 

[Note.  The  Wisconsin  act  (§  1676-22)  adds  a  fifth  subdivision:  "5.  That 
he  took  It  in  the  usual  course  of  business."] 

»  §§  51-59.  Colo..  Conn..  D.  C,  Fla..  Mass.,  N.  C,  N.  D..  Or..  Tenn.,  Utah, 
Va.,  and  Wash.;  §§  70-78,  Md.;  §§  59-67,  R.  I.;  §§  1U76-21  to  1676-29,  Wis. 


BIGHTS    OF   HOLDER.  451 

Sec.  92  (53).      When  Person  not  Deemed  Holder  in  Dtta  Course. 

Where  an  instrument  payable  on  demand  (a)  is  negotiated  an  un- 
reasonable length  of  time  after  its  issue,  the  holder  is  not  deemed  a 
holder  in  due  course. 

(a)  See  §  26  (7). 

Sec.  93  (54).     Notice  he/ore  Full  Amount  Paid. 

Where  the  transferee  receives  notice  of  any  infirmity  in  the  in- 
strument or  defect  in  the  title  of  the  person  negotiating  the  same 
before  he  has  paid  the  full  amount  agreed  to  be  paid  thereof,  he 
will  be  deemed  a  holder  in  due  course  onlj  to  the  extent  of  the 
amount  theretofore  paid  by  him. 

Sec.   94  (55).      When  Title  Defective. 

The  title  of  a  person  who  negotiates  an  instrument  Is  defective 
within  the  meaning  of  this  act  when  he  obtained  the  instrument,  or 
any  signature  thereto,  by  fraud,  duress,  or  force  and  fear,  or  other 
unlawful  means,  or  for  an  illegal  consideration,  or  when  he  nego- 
tiates it  in  breach  of  faith,  or  under  such  circumstances  as  amount 
to  a  fraud,  (a) 

(a)  The  Wisconsin  act  (§  167e-25)  adds  the  following:  "And  the  title  ol 
such  person  is  absolutely  void  when  such  instrument  or  sifinfiture  was  so  pro- 
cured from  a  person  who  did  not  know  the  nature  of  the  instrument  and  could 
not  have  obtained  such  knowledge  by  the  use  of  ordinary  care." 

Sec.  95  (56).      Wliat  Constitutes  Notice  of  Defect. 

To  constitute  notice  of  an  infirmity  in  the  instrument  or  defect 
in  the  title  of  the  person  negotiating  the  same,  the  person  to  whom 
it  is  negotiated  must  have  had  actual  knowledge  of  the  infirmity  or 
defect,  or  knowledge  of  such  facts  that  his  action  in  taking  the  in- 
strument amounted  to  bad  faith. 

Sec.  96  (57).     Bights  of  JJolder  in  Due  Course. 

A  holder  in  due  course  holds  the  instrument  free  from  any  defect 
of  title  of  prior  parties  and  free  from  defenses  available  to  prior 
parties  among  themselves,  and  may  enforce  payment  of  the  iuslru- 
ment  for  the  full  amount  thereof  against  all  i)arties  liable  thcrcoii.  (a) 

(a)  The  Wisconsin  act  (§  1G7G-27)  adds  the  following:  "Except  as  provided 
In  sections  1944  and  1945  of  these  statutes,  relating  to  Insurance  premiums, 
and  also  In  cases  where  the  title  of  the  person  ni-gotiatlug  such  luslrumout  is 
void  under  the  proviblon  of  section  1G7G-25  of  thiti  ucL" 


462  THE    NEGOTIABLE    INSTRUMENTS    LAW. 

Sec.  97  (58).      W/i^n  Subject  to  Original  Defenses. 

In  the  hands  of  any  holder  other  than  a  holder  in  due  course,  a 
negotiable  instrument  is  subject  to  the  same  defenses  as  if  it  were 
nonnegotiable.  But  a  holder  who  derives  his  title  through  a  holder 
In  due  course,  and  who  is  not  himself  a  party  to  any  fraud  (a)  or 
illegality  affecting  the  instrument,  has  all  the  rights  of  such  former 
holder  in  respect  of  all  parties  prior  to  the  latter,  (b) 

(a)  The  Wisconsin  act  (§  1076-28)  inserts  after  "fraud,"  "duress.'* 

(b)  The  Wisconsin  act  substitutes  for  "the  latter,"  "such  holder.** 

Sec.  98  (59).      Who  Deemed  Ilolder  in  Due  Course. 

Every  holder  is  deemed  prima  facie  to  be  a  holder  in  due  course; 
but  when  it  is  shown  that  the  title  of  any  person  who  has  negotiated 
the  instrument  was  defective,  the  burden  is  on  the  holder  to  prove 
that  he  or  some  person  under  whom  he  claims  acquired  the  title  as 
a  holder  in  due  course.  But  the  last-mentioned  rule  does  not  apply 
in  favor  of  a  party  who  became  bound  on  the  instrument  prior  to  the 
aquisition  of  such  defective  title. 


LIABILITIES    OF    PARTIES.  458 


ARTICLE  VI.« 

LIABILITIES  OF  PARTIES 

Section  110.  Liability  of  Maker. 

111.  Liability  of  Drawer. 

112.  Liability  of  Acceptor. 

113.  When  Person  Deemed  Indorser. 

114.  Liability  of  Irregular  Indorser. 

115.  Warranty;   Where  Negotiation  by  Delivery,  et  eetenb        • 

116.  Liability  of  General  Indorsers. 

117.  Liability  of  Indorser  where  Paper  Negotiablt  by  DellTery* 

118.  Order  in  which  Indorserg  are  Liable. 

119.  Liability  of  Agent  or  Broker, 

Sec.  110  (60).     Liahility  of  Maker, 

The  maker  of  a  negotiable  instrument  by  making  it  engages  that 
he  will  pay  it  according  to  its  tenor;  and  admits  the  existence  of  the 
payee  and  his  then  capacity  to  indorse. 

Sec.  Ill  (61).     Liability  of  Drawer, 

The  drawer  by  drawing  the  instrument  admits  the  existence  of 
the  payee  and  his  then  capacity  to  indorse;  and  engages  that  on  due 
presentment  the  instrument  will  be  accepted  and  (a)  paid,  or  both, 
according  to  its  tenor,  and  that  if  it  be  dishonored,  and  the  neces- 
sary proceedings  on  dishonor  be  duly  taken,  he  will  pay  the  amount 
thereof  to  the  holder,  or  to  any  subsequent  (b)  indorser  who  may  be 
compelled  to  pay  it.  But  the  drawer  may  insert  in  the  instrument 
an  express  stipulation  negativing  or  limiting  his  own  liability  to  the 
holder.  . 

(a)  Other  acts  read  "accepted  or  paid." 

(b)  The  Colorado  act  (§  Gl)  omits  "subsequent" 

Sec.  112  (62).     Liahility  of  Acceptor. 

The  acceptor  by  accepting  (a)  the  instrument  engages  that  he  will 
pay  it  according  to  the  tenor  of  his  acceptance  (b);  and  admits: 

•  §§  nO-G9.  Colo.,  Conn.,  D.  O..  Fla..  Mass.,  N.  C.  N.  D.,  Or..  Tenn.,  Utah,  Va., 
and  Wash.;   §§  7U-ys,  Md.;   ii  Gii-77,  U.  L;   SS  1077  to  1U77-9,  Wla. 


454  THE   NEGOTIABLE    INSTRUMENTS    LAW. 

1.  The  existence  of  the  drawer,  the  genuineness  of  his  signature, 
and  his  capacity  and  authority  to  draw  the  instrument;  and 

2.  The  existence  of  the  payee  and  his  then  capacity  to  indorse. 

(a)  See  ?§  220  (132)-230  (142). 

(b)  See  §  130  (70). 

Sec.   113  (63).      ]Vhen  Person  Deemed  Tndorser, 

A  person  placing  his  signature  upon  an  instrument  otherwise 
than  as  maker,  drawer,  or  acceptor  is  deemed  to  be  an  indorser, 
unless  he  clearly  indicates  by  appropriate  words  his  intention  to  be 
bound  in  some  other  capacity,  (a) 

(a)  See  §  36  (17),  subd.  6. 

Sec.  114  (64).     Liability  of  Irregular  Indorser, 

Where  a  parson,  not  otherwise  a  party  to  an  instrument,  places 
thereon  his  signature  in  blank  before  delivery,  he  is  liable  as  in- 
dorser  in  accordance  with  the  following  rules: 

1.  If  the  instrument  is  payable  to  the  order  of  a  third  person,  he 
is  liable  to  tht  payee  and  to  all  subsequent  parties. 

2.  If  tne  instrument  is  payable  to  the  order  of  the  maker  or  drawer, 
or  is  payable  to  bearer,  he  is  liable  to  all  parties  subsequent  to  the 
naker  or  drawer.  . 

8.  If  he  signs  for  the  accommodation  of  the  payee,  he  is  liable  to  all 
parties  subsequent  to  the  payee. 

Sec.  115  (85).      Warranty;  Where  Negotiation  hy  Delivery ^  et  cetera. 

Every  person  negotiating  an  instrument  by  delivery  or  by  a  qual- 
ified indorsement,  warrants: 

1.  That  the  instrument  is  genuine  and  in  all  respects  what  it  pur- 
ports to  be; 

2.  That  he  has  a  good  title  to  it; 

8.  That  all  prior  parties  had  capacity  to  contract; 

4.  That  he  has  no  knowledge  of  any  fact  which  would  impair  the 
validity  of  the  instrument  or  render  it  valueless. 

But  when  the  negotiation  is  by  delivery  only,  the  warranty  ex- 
tends in  favor  of  no  holder  other  than  the  immediate  transferee. 
The  provisions  of  subdivision  three  of  this  section  do  not  apply  to 
persons  negotiating  public  or  corporate  securities,  other  than  bills 
and  uotesi. 


LIABILITIES    OF    PARTIES.  456 

Sec.  116  (QQ).     Liahility  of  General  Indorser. 

Every  indorser  who  indorses  without  qualifications,  warrants  to 
all  subsequent  holders  in  due  course: 

1.  The  matter  and  things  mentioned  in  subdivisions  one,  two,  and 
three  of  the  next  preceding  section ;  and 

2,  That  the  instrument  is  at  the  time  of  his  indorsement  valid  and 
subsisting. 

And,  in  addition,  he  engages  that  on  due  presentment  it  shall  be 
accepted  or  paid,  or  both,  as  the  case  may  be,  according  to  its  tenor, 
and  that  if  it  be  dishonored,  and  the  necessary  proceedings  on  dis- 
honor be  duly  taken,  he  will  pay  the  amount  thereof  to  the  holder, 
or  to  any  subsequent  indorser  who  may  be  compelled  to  pay  it. 

Sec.  117  (67).     Liability  of  Indorser  where  Paper  Negotiable  by  Delivery. 
Where  a  person  places  his  indorsement  on  an  instrument  nego- 
tiable by  delivery  he  incurs  all  the  liabilities  of  an  indorser. 

Sec.  118  (68).     Order  in  Which  Indorsers  are  Liable. 

As  respects  one  another,  indorsers  are  liable  prima  facie  in  the 
order  in  which  they  indorse;  but  evidence  is  admissible  to  show  that 
as  between  or  among  themselves  they  have  agreed  otherwise.  Joint 
payees  or  joint  indorsees  who  indorse  are  deemed  to  indorse  jointly 
and  severally. 

Sec.   119  (69).     Liability  of  Agent  or  Broker. 

Where  a  broker  or  other  agent  negotiates  an  instrument  without 
indorsement,  he  incurs  all  the  liabilities  prescribed  by  section  115  (a) 
of  this  act,  unless  he  discloses  the  name  of  his  principal,  and  the 
fact  that  he  is  acting  only  as  agent. , 

(a)  "Section  65"  In  original  New  York  act  by  mlstaka 


455  THE    NEGOTIABLE    INSTRUMENTS    LAW. 

ARTICLE  Vn.' 

PRESENTMENT   FOR   PAYMENT. 

Section  130.  Effect  of  Want  of  Demnnd  on  Principal  Debtor. 

131.  Presentment  where  Instrument  Is  not  Payable  on  DemancL 

132.  What  Constitutes  a  Sufficient  Presentment, 

133.  Place  of  Presentment 

134.  Instrument  Must  be  EJxhlblted. 

135.  Presentment  where  Instrument  Payable  at  Bank. 
138.  Presentment  where  Principal  Debtor  is  Dead. 

137.  Presentment  to  Persons  Liable  as  Partnera. 

138.  Presentment  to  Joint  Debtors. 

139.  When  Presentment  not  Required  to  Charge  the  Drawer. 

140.  When  Presentment  not  Required  to  Charge  the  Indorser. 

141.  When  Delay  In  Making  Presentment  Is  Excused. 

142.  When  Presentment  May  be  Dispensed  With. 

143.  When  Instrument  Dishonored  by  Non-Payment 

144.  Liability  of  Persons  Secondarily  Liable,  When  Instrument  Dl»> 

honored. 

145.  Time  of  Maturity. 
148.     Time;  How  Computed. 

147.  Rule  where  Instrument  Payable  at  Bank. 

148.  What  Constitutes  Payment  In  Due  Course^ 

Sec.  130  (70).     Effect  of  Want  of  Demand  on  Principal  Debtor. 

Presentment  for  payment  is  not  necessary  in  order  to  charge  the 
person  primarily  liable  on  the  instrument  (a);  but  if  the  instrument 
is,  by  its  terms,  payable  at  a  special  place,  and  he  is  able  and  will- 
ing to  pay  it  there  at  maturity,  and  has  funds  there  available  for 
that  purpose  (b),  such  ability  and  willingness  are  equivalent  to  a 
tender  of  payment  upon  his  part  But  except  as  herein  otherwise 
provided,  presentment  for  payment  is  necessary  in  order  to  charge 
the  drawer  and  indorsers.  (c) 

(a)  The  Wisconsin  act  (§  1678)  omits  that  part  of  the  first  sentence  following 
the  words  "primarily  liable  on  the  instrument." 

(b)  The  words  "and  has  funds  there  available  for  that  purpose"  were  added 
to  the  New  York  act  by  amendment     They  are  not  found  In  the  other  states. 

(c)  See  §§  111  (61),  116  (66). 

1  §§  70-88,  Colo.,  Conn.,  D.  C,  Fla.,  Mass.,  N.  C.  N.  D.,  Or.,  Tenn.,  Utah,  Va., 
and  Wash.;   g§  89-1U7,  Md.;   %i  78-96,  i;.  L;   iii  1U7S  to  1678-18,  Wis. 


PRESENTMENT    FOR    PAYMENT.  457 

Sec.  131  (71).  Presentment  where  Instrument  is  not  Payable  on 
Pemand — [  Where  Payable  on  Pemand.'] 
Where  the  instrument  ia  not  payable  on  demand,  presentment 
must  be  made  on  the  day  it  falls  due.  (a)  "UTiere  it  is  payable  on  de- 
mand, presentment  must  be  made  within  a  reasonable  time  (b)  after 
its  issue,  except  that  in  the  case  of  a  bill  of  exchange,  presentment 
for  payment  will  be  sufficient  if  made  within  a  reasonable  time  after 
the  last  negotiation  thereof,  (c) , 

(a)  See  §  145  (85). 

(b)  See  §  4  (193). 

(c)  See  §§  241  (144),  322  (186). 

Sec.  132  (72).      WJuit  Constitutes  Sufficient  Presentment, 

Presentment  for  payment,  to  be  sufficient,  must  be  madei 

L  By  the  holder,  or  by  some  person  authorized  to  receive  payment 

on  his  behalf; 

2.  At  a  reasonable  hour  on  a  business  day; 

3.  At  a  proper  place  as  herein  defined;  (a) 

4.  To  the  person  primarily  liable  on  the  Instrument,  or  !f  he  la 
absent  or  inaccessible,  to  any  person  found  at  the  place  where  the 
presentment  is  made. 

(a)  See  §  133  (73). 

Sec.  133  (73).     Place  of  Presentment, 

Presentment  for  payment  is  made  at  the  proper  place: 

1.  Where  a  place  of  payment  is  specified  in  the  instrument  and 
it  is  there  presented; 

2.  Where  no  place  of  payment  is  specified,  but  the  address  of  the 
person  to  make  payment  is  given  in  the  instrument  and  it  is  there 
presented; 

3.  Where  no  place  of  payment  Is  specified  and  no  address  is  given 
and  the  instrument  is  presented  at  the  usual  place  of  business  or 
residence  of  the  person  to  make  payment; 

4.  In  any  other  case  if  presented  to  the  person  to  make  pamient 
wherever  he  can  be  found,  or  if  presented  at  his  last  known  place 
of  business  or  residence. 

Sec.  134  (74).     Instrument  2fi.ist  he  ExMhited, 

The  instrument  must  be  exhibited  to  the  porson  from  whnm  pay- 
ment is  dprnaiided,  and  when  it  is  paid  must  be  delivered  up  to  the 
party  paying  it 


453  THE    NEGOTIABLE   INSTRUMENTS    LAW. 

Sec.  135  (75).     Presentment  where  Instrument  Payable  at  Bank. 

Where  the  instrument  is  payable  at  a  banlt,  presentment  for  pay- 
ment must  be  made  during  banking  hours,  unless  the  person  to  make 
payment  has  no  funds  there  to  meet  it  at  any  time  during  the  day, 
in  which  case  presentment  at  any  hour  before  the  bank  is  closed  on 
that  day  is  sutlicient. 

Sec.   136  (76).     Presentment  where  Principal  Debtor  is  Dead. 

Where  the  person  primarily  liable  on  the  instrument  is  dead,  and 
no  place  of  payment  is  specified,  presentment  for  payment  must  be 
made  to  his  personal  representative,  if  such  there  be,  and  if  with 
the  exercise  of  reasonable  diligence   he  can  be  found. 

Sec.   137  (77).     Presentment  to  Persons  Liable  as  Partners, 

Where  the  persons  primary  liable  on  the  instrument  are  liable 
as  partners,  and  no  place  of  payment  is  specified,  presentment  for 
payment  may  be  made  to  any  one  of  them,  even  though  there  has 
been  a  dissolution  of  the  firm. 

Sec.  138  (78).     Presentment  to  Joint  Debtors, 

Where  there  are  several  persons  not  partners,  primarily  liable  on 
the  instrument,  and  no  place  of  payment  is  specified,  presentment 
must  be  made  to  them  all. 

Sec.  139  (79).  When  Presentment  not  Required  to  Charge  the 
Drawer. 

Presentment  for  payment  is  not  required  in  order  to  charge  the 
drawer  where  he  has  no  right  to  expect  or  require  that  the  drawee 
or  acceptor  will  pay  the  instrument,  (a) 

(a)  See  §  185  (114),  subd.  4. 

Sec.  140  (80).      When    Presentment    not    Required    to    Chxirge    th 
Indorser. 
Presentment  for  payment  is  not  required  in  order  to  charge  an 
indorser  where  the  instrument  was  made  or  accepted  for  his  ac- 
commodation, and  he  has  no  reason  to  expect  that  the  instrument 
will  be  paid  if  presented,  [a), 
(a)  See  §  186  (115),  subd.  3. 

Sec.  141  (81).      Wlien  Delay  in  Making  Presentment  is  Excused. 

Delay  in  making  presentment  for  payment  is  excused  when  the 
delay  is  caused  by  circumstances  beyond  the  control  of  the  holder 


PRESENTMENT    FOR    PAYMENT.  459 

and  not  Imputable  to  his  default,  misconduct  or  negligence.  When 
the  cause  of  delay  ceases  to  operate,  presentment  must  be  made 
with  reasonable  diligence. 

Sec.  142  (82).      When  Presentment  May  he  Dispensed  voitfu 

Presentment  for  payment  is  dispensed  with: 

1.  Where  after  the  exercise  of  reasonable  diligence  presentment 
as  required  by  this  act  can  not  be  made; 

2.  Where  the  drawee  is  a  fictitious  person;  (a) 

3.  By  waiver  of  presentment  express  or  implied-  (b) 

(a)  See  §  185  (114),  subd.  2. 

(b)  See  §§  180  (109)-182  (111). 

Sec.  143  (83).      When  Instrument  Dishonored  by  Non-PaymenU 
The  instrument  is  dishonored  by  non-payment  when: 

1.  It  is  duly  presented  for  payment  and  payment  is  refused  or  can 
not  be  obtained;   or 

2.  Presentment  is  excused  and  the  instrument  is  overdue  and  un* 
paid. 

Sec.  144  (84).     Liability  of  Person  Secondarily   Liable^    When  Instrument 
Dishonored. 
Subject  to  the  provisions  of  this  act,  when  the  instrument  is  dis- 
honored by  non-payment,  an  immediate  right  of  recourse  to  all  par- 
ties secondarily  liable  thereon,  accrues  to  the  holder. 

Sec.  145  (85).     Time  of  Maturity. 

Every  negotiable  instrument  is  payable  at  the  time  fixed  therein 
without  grace.  When  the  day  of  maturity  falls  upon  Sunday,  or  a 
holiday,  the  instrument  is  payable  on  the  next  succeeding  business 
day.  (a)  Instruments  falling  due  or  becoming  payable  (b)  on  Sat- 
urday are  to  be  presented  for  payment  on  the  next  succeeding  busi- 
ness day,  except  that  instruments  payable  on  demand  may,  at  the 
option  of  the  holder,  be  presented  for  payment  before  twelve  o'clock 
noon  on  Saturday  when  that  entire  day  is  not  a  holiday. 

(a)  The  Wisconsin  act  (§  1678-15)  omits  the  sentence  beginning  "Instru- 
ments falling  due,"  etc. 

In  the  Colorado  act  (§  85)  this  sentence  Is  omitted,  and  the  following  substi- 
tuted: "Instruments  falling  due  on  any  day.  In  any  place  where  any  part  of 
Buch  day  Is  a  holiday  are  to  be  presented  for  payment  on  the  next  succeeding 
busint-tis  day,  exci'ijt  that  iuslrumeutii  payable  on  demand  may,  at  the  option 


4GJ  THE    NEC.OTIABLE    INSTRUMENTS    LAW. 

of  the  holder,  he  presented  for  payment  during  reasonable  hoiira  of  the  part 
of  such  day  which  is  not  a  holltlay." 

The  North  Carolina  act  (§  197)  provides:  "The  laws  now  in  force  In  this 
state  with  regard  to  days  of  grace  shall  remain  in  force  and  shall  not  be  con- 
strued to  be  repealed  by  this  act." 

In  Massachusetts  this  section  has  been  modified  (Law»  1800.  c.  130)  as 
follows:  "On  ail  drafts  and  bills  of  exchange  made  payable  within  this  Com- 
monwealth at  sight,  three  days  of  grace  shall  be  allowed,  unless  there  is  an 
express  stipulation  therefor  to  the  contrary." 

(b)  The  words  "on  becoming  payable"  were  added  to  the  New  York  act  by 
amendment    They  do  not  appear  In  the  other  states. 

Sec.  146  (86).     Time;  How  Computed, 

Where  the  instrument  is  payable  at  a  fixed  period  after  date,  after 
sight,  or  after  the  happening  of  a  specified  event,  the  time  of  payment 
is  determined  by  excluding  the  day  from  which  the  time  is  to  begin 
to  run,  and  by  including  the  date  of  payment. 

Sec.  147  (87).     Bute  where  Instrument  Payable  at  Bank. 

Where  the  instrument  is  made  payable  at  a  bank  it  Is  eqniraTent 
to  an  order  to  the  bank  to  pay  the  same  for  the  account  of  the  prin- 
cipal debtor  thereon. 

Sec.  148  (88).      What  Qmstitutes  Payment  in  Due  Course. 

Payment  is  made  in  due  course  when  it  is  made  at  or  after  the  ma- 
turity of  the  instrument  to  the  holder  (a)  thereof  in  good  faith  and 
without  notice  that  his  title  is  defective,  (b) 

(a)  See  §  2  (191)  "holder." 

(b)  See  §i  94  (55),  95  (56).  200  (119). 


NOTICE    OF    DISHONOR,  461 

ARTICLE  Vm* 

NOTICE    OF    DISHONOR. 

Section  IGO.  To  Whom  Notice  of  Dishonor  Must  be  Given. 

161.  By  Whom  Given. 

162.  Notice  Given  by  Agent. 

163.  Effect  of  Notice  Given  on  Behalf  of  Holder. 

164.  Effect  where  Notice  is  Given  by  Party  Entitled  Thereto. 

165.  When  Agent  may  Give  Notice. 

166.  When  Notice  Sufficient. 

167.  Form  of  Notice. 

168.  To  Whom  Notice  May  be  Given. 
1G9.  Notice  where  Party  la  Dead. 

170.  Notice  to  Partners. 

171.  Notice  to  Persons  Jointly  Liable, 

172.  Notice  to  Bankrupt. 

173.  Time  within  Which  Notice  Must  be  Given, 

174.  Where  Parties  Reside  In  Same  Place. 

175.  Where  Parties  Reside  In  Different  Places. 

176.  When  Sender  Deemed  to  have  Given  Due  Notlcflii 

177.  Deposit  In  Post-Office,  What  Constitutes, 

178.  Notice  to  Subsequent  Parties,  Time  o£. 

179.  Where  Notice  Must  be  Sent. 
ISO.  Waiver  of  Notice. 

181.  Whom  Affected  by  Waiver, 

182.  Waiver  of  Protest. 

183.  When  Notice  Dispensed  with. 

184.  Delay  in  Giving  Notice;   How  Excused. 

185.  When  Notice  Need  not  be  Given  to  Drawer. 

186.  When  Notice  Need  not  be  Given  to  Indorser. 

187.  Notice  of  Non-Payment  where  Acceptance  Refused, 

188.  Effect  of  Omission  to  Give  Notice  of  Non-Acceptance. 

189.  When  Protest  Need  not  be  Made;  When  Must  be  Made, 

Sec.  160  (89).     To   Whom  Notice  of  Dishonor  Mmt  he  Given. 

Except  as  herein  otherwise  provided  (a),  when  a  negotiable  in- 
strument has  been  dishonored  by  non-acceptance  (b)  or  non-payment 
(c),  notice  of  dishonor  must  be  given  to  the  drawer  and  to  each  in- 

•  8S  89-118,  Colo.,  Conn.,  D.  C.  Fla.,  Mass.,  N.  C,  N.  D.,  Dr.,  Tenn.,  Utah, 
ya.,  and  Wash.;  S$  108-137.  Md.;   §§  97-12U,  U.  I.;  S§  1078-19  to  1078-48,  Wia 


4  02  TIIK    NEGOTIABLE   INSTRUMENTS    LAW. 

durser,  and  auy  drawer  or  indorser  to  whom  such  notice  is  not  given 
is  discharji^od. 

(M)  See  §§  ISO  (109)-1S7  (116). 
(b)  See  §§  246  (149)-ai8  (151). 
(e)  See  §§  143  (83).  144  (84). 

Sec.  161  (90).     By   Whom  Given, 

The  notice  may  be  given  by  or  on  behalf  of  the  holder,  or  by  or 
on  behalf  of  any  party  to  the  instrument  who  might  be  compelled 
to  pay  it  to  the  holder,  and  who,  upon  taking  it  up,  would  have  a 
right  to  reimbursement  from  the  party  to  whom  the  notice  is  given. 

Sec.  162  (91).     Notice  Giien  by  Agent. 

Notice  of  dishonor  may  be  given  by  an  agent  either  in  his  own 
name  or  in  the  name  of  any  party  entitled  to  give  notice,  whether 
that  party  be  his  principal  or  not. 

Sec.  163  (92).     Ejfed  of  Koike  Given  on  Behalf  of  Holder. 

Where  notice  is  given  by  or  on  behalf  of  the  holder,  it  enures  for 
the  benefit  of  all  subsequent  holders  and  all  prior  parties  who  have 
a  right  oi  recourse  against  the  party  to  whom  it  is  given. 

Sec.  164  (93).     Effect  whero  Notice  is  Given  by  Party  Entitled  Thereto. 

Where  notice  is  given  by  or  on  behalf  of  a  party  entitled  to  give 
notice,  it  enures  for  the  benefit  of  the  holder  and  all  parties  subse- 
quent to  the  party  to  whom  notice  is  given. 

Sec.  165  (94).      Whm  Agent  may  Give  Notice, 

Where  the  instrument  has  been  dishonored  in  the  hands  of  an 
agent,  he  may  either  himself  give  notice  to  the  parties  liable  thereon, 
or  he  may  give  notice  to  his  principal.  If  he  give  notice  to  his  prin- 
cipal, he  must  do  so  within  the  same  time  as  if  he  were  the  holder, 
and  the  principal  upon  the  receipt  of  such  notice  has  himself  the  same 
time  for  giving  notice  as  if  the  agent  had  been  an  independent  holder. 

Sec.  166  (95).      When  Notice  Sufficient. 

A  written  notice  need  not  be  signed  and  an  insufficient  written  no- 
tice may  be  supplemented  and  validated  by  verbal  communication. 
A  misdescription  of  the  instrument  does  not  vitiate  the  notice  unless 
the  party  to  whom  the  notice  is  given  is  in  fact  misled  thereby. 


KOTICE    OF    DISHONOR.  463 

Bee.  167  (96).     Form  of  Notice. 

The  notice  may  be  in  writing  or  merely  oral,  and  may  be  given  !n 
any  terms  which  sufiBciently  identify  the  instrument,  and  indicate 
that  it  has  been  dishonored  by  non-acceptance  or  non-payment.  It 
may  in  all  cases  be  given  by  delivering  it  personally  or  through  the 
mails,  (a) 

(a)  See  §§  177  (106),  179  (108). 

8ec.  168  (97).     To  Whom  Notice  May  he  Given. 

Notice  of  dishonor  may  be  given  either  to  the  party  himself  or  to 
his  agent  in  that  behalf. 

Sec.  169  (98).     Notice  where  Party  is  Dead, 

"WTien  any  party  is  dead,  and  his  death  is  Icnown  to  the  pnrty 
giving  notice,  the  notice  must  be  given  to  a  personal  represeatative, 
if  there  be  one,  and  if  with  reasonable  diligence,  he  can  be  found. 
If  there  be  no  personal  representative,  notice  may  be  sent  to  the 
last  residence  or  last  place  of  business  of  the  deceased. 

Sec.  170  (99).     Notice  to  Partners. 

Where  the  parties  to  be  notified  are  partners,  notice  to  any  one 
partner  is  notice  to  the  firm  even  though  there  has  been  a  dissolu- 
tion. 

Sec.  171  (100).     Notice  to  Persons  Jointly  Liable. 

Notice  to  joint  parties  who  are  not  partners  must  hp  givon  to  each 
of  them,  unless  one  of  them  has  authority  to  receive  aacix  notice 
for  the  others. 

Sec.  172  (101).     Notice  to  Bankrupt 

Where  a  party  has  been  adjudged  a  bankrupt  or  an  insolvont,  nr 
has  made  an  assignment  for  the  benefit  of  creditors,  uotice  may  be 
given  either  to  the  party  himself  or  to  his  trustee  or  assiguee. 

Sec.  173  (102).     Time  within  Which  Notice  Must  he  Given. 

Notice  may  be  given  as  soon  as  the  instrument  is  dishonored;  and 
unless  delay  is  excused  as  hereinafter  provided,  must  be  given  within 
the  times  fixed  by  this  act. 

Sec.  174  (103).      Where  Parties  Reside  in  Same  Place. 

Where  the  person  giving  and  the  person  to  receive  notice  reside  in 
the  same  place,  notice  must  be  given  within  the  following  limea; 


464  THK    NEGOTIABLE    INSTRUMENTS    LAW. 

1.  If  given  at  the  place  of  business  of  the  person  to  receive  notice, 
It  must  be  given  before  the  close  of  business  hours  ou  the  daj  fol- 
lowing; 

2.  If  given  at  his  residence,  it  must  be  given  before  the  usual 
hours  of  rest  on  tlie  daj  following; 

3.  If  sent  by  mail,  it  must  be  deposited  in  the  post-ofQce  in  time 
to  reach  him  in  usual  course  on  the  day  following. 

Sec.  175  (104).      Where  Parties  Beside  in  Different  Places. 

"SMiere  the  person  giving  and  the  person  to  receive  notice  reside 
in  different  places,  the  notice  must  be  given  within  the  following 
times: 

1.  If  sent  by  mail,  it  must  be  deposited  in  the  postoflSce  in  time  to 
go  by  mail  the  day  following  the  day  of  dishonor,  or  if  there  be  no 
mail  at  a  convenient  hour  on  that  day,  by  the  next  mail  thereafter. 

2.  If  given  otherwise  than  through  the  post-oflBce,  then  within  the 
time  that  notice  would  have  been  received  in  due  course  of  mail, 
if  it  had  been  deposited  in  the  post-office  within  the  time  specified 
in  the  last  subdivision. 

Sec.  176  (105).      When  Sender  Deemed  to  have  Given  Due  Notice, 

WTiere  notice  of  dishonor  is  duly  addressed  and  deposited  in  the 
post-office,  the  sender  is  deemed  to  have  given  due  notice,  notwith- 
standing any  miscarriage  in  the  mails. 

Sec.  177  (106).     Dqjodt  in  Post-Office;   What  Constitutes. 

Notice  is  deemed  to  have  been  deposited  in  the  post-office  when 
deposited  in  any  branch  post-office  or  in  any  letter  box  under  the 
control  of  the  post-office  department. 

Sec.  178  (107).     Notice  to  Subsequent  Party;  Time  of. 

Where  a  party  receives  notice  of  dishonor,  he  has,  after  the  re- 
ceipt of  such  notice,  the  same  time  for  giving  notice  to  antecedent 
parties  that  the  holder  has  after  the  dishonor. 

Sec.  179  (108).      Where  Notice  Must  he  Sent. 

Where  a  party  has  added  an  address  to  his  signature,  notice  of 
dishonor  must  be  sent  to  that  address;  but  if  he  has  not  given  such 
address,  then  the  notice  must  be  sent  as  follows: 

1.  Either  to  the  post-office  nearest  to  his  place  of  residence,  or 
to  the  post-office  where  is  is  accustomed  to  receive  his  letters ;  or, 


NOTICE    OF    DISHONOR.  465 

2.  If  he  live  in  one  place,  and  have  his  place  of  business  in  an- 
other, notice  maj  be  sent  to  either  place;  or, 

3.  If  he  is  sojourning  in  another  place,  notice  may  be  sent  to  the 
place  where  he  is  so  sojourning. 

But  where  the  notice  is  actually  received  by  the  party  within  the 
time  specified  in  this  act,  it  will  be  sufficient  though  not  sent  in  ac- 
cordance with  the  requirements  of  this  section. 

Sec.  180  (109).      Waiver  of  Notice. 

Notice  of  dishonor  may  be  waived,  either  before  the  time  of  giving 
notice  has  arrived  or  after  the  omission  to  give  due  notice,  and  the 
waiver  may  be  express  or  implied. 

Sec.  181  (110).      Whom  Affected  by  Waiver, 

Where  the  waiver  is  embodied  in  the  instrument  itself,  it  is  bind- 
ing upon  all  parties;  but  where  it  is  written  above  the  signature 
of  an  indorser,  it  binds  him  only. 

Sec.  182  (111).      Waiver  of  Protest, 

A  waiver  of  protest,  whether  in  the  case  of  a  foreign  bill  of  ex- 
change or  other  negotiable  instrument,  is  deemed  to  be  a  waiver  not 
only  of  a  formal  protest,  but  also  of  presentment  and  notice  of  dis- 
honor. 

Sec.  183  (112).      When  Notice  is  Dispensed  with. 

Notice  of  dishonor  is  dispensed  with  when,  after  the  exercise  of 
reasonable  diligence,  it  can  not  be  given  to  or  does  not  reach  the 
parties  sought  to  be  charged. 

Sec.  184  (113).     Delay  in  Giving  Notice;  How  Excused. 

Delay  in  giving  notice  of  dishonor  is  excused  when  the  delay  is 
caused  by  circumstances  beyond  the  control  of  the  holder  and  not 
imputable  to  his  default,  misconduct  or  negligence.  When  the  cause 
of  delay  ceases  to  operate,  notice  must  be  given  with  reasonable  dil- 
igence. 

Sec.  185  (114).      When  Notice  Need  not  he  Given  to  Drawer, 

Notice  of  dishonor  is  not  required  to  be  given  to  the  drawer  in 
either  of  the  following  cases: 
NEG.BILLS.-30 


466  THE    NEGOTIABLE    INSTRUMENTS    LAW. 

1.  Where  the  drawer  and  drawee  are  the  same  person; 

2.  Where  the  drawee  is  a  fictitious  peisoii  or  a  person  not  having 
capacity  to  contract; 

3.  Whore  the  drawer  is  the  person  to  whom  the  instrument  is 
presented  for  payment; 

4.  Where  the  drawer  has  no  right  to  expect  or  require  that  the 
drawee  or  acceptor  will  honor  the  instrument; 

5.  Where  the  drawer  has  countermanded  payment. 

Sec.  186  (115).      Wien  Notice  Need  not  he  Given  to  Indorser, 

Notice  of  dishonor  is  not  required  to  be  given  to  an  indorser  in 
either  of  the  following  cases: 

1.  Where  the  drawee  is  a  fictitious  person  or  a  person  not  having 
capacity  to  contract,  and  the  indorser  was  aware  of  the  fact  at  the 
time  he  indorsed  the  instrument; 

2.  ^^'he^e  the  indorser  is  the  person  to  whom  the  instrument  la 
presented  for  payment; 

3.  Where  the  instrument  was  made  or  accepted  for  his  accommo- 
dation. 

Sec.  187  (116).     Notice  of  Non-Payment  where  Acceptance  Refused. 

Where  due  notice  of  dishonor  by  non-acceptance  has  been  given, 
notice  of  a  subsequent  dishonor  by  non-payment  is  not  necessary, 
unless  in  the  meantime  the  instrument  has  been  accepted. 

Sec.  188  (117).     Effect  of  Omission  to  Give  Notice  of  Non-Acceptance. 

An  omission  to  give  notice  of  dishonor  by  non-acceptance  does  not 
prejudice  the  rights  of  a  holder  in  due  course  subsequent  to  the 
omission,  (a) 

(a)  The  Wisconsin  act  (§  1678-47)  adds:  "But  this  shall  not  be  constnied 
to  revive  any  liability  discharged  by  such  omission." 

Sec.  189  (118).      Wlim  Protest   Need  not  he  Made;  When  Must  he  3Iade. 

Where  any  negotiable  instrument  has  been  dishonored  it  may  be 
protested  for  non-acceptance  or  non-payment,  as  the  case  may  be; 
but  protest  is  not  required,  except  in  the  case  of  foreign  bills  of  ex- 
change, (a) 

(a)  See  §§  260  (162)-268  (160), 


DISCHARGE   OF    KEGOTIABLE    IiS'STRUME>'T3.  467 


ARTICLE    IX.' 

DISCHAROE   OF   NEGOTIABLE   INSTRUMENTS, 

flection  200.  Instrument;  How  Discharged. 

201.  When  Persons  Secondarily  Liable  on.  Discharged, 

202.  Right  of  Party  who  Discharges  Instrument. 

203.  Renunciation  by  Holder. 

204.  Cancellation;   Unintentional;  Burden  of  Proof, 

205.  Alteration  of  Instrument;    Effect  of. 

206.  What  Constitutes  a  Material  Alteration. 

fiec.  200  (119).     Instrument;  How  Discharged, 
A  negotiable  instrument  is  discharged: 

1.  By  payment  in  due  course  by  or  on  behalf  of  the  principal 
debtor;  (a) 

2.  By  payment  in  due  course  by  the  party  accommodated,  where 
the  instrument  is  made  or  accepted  for  accommodation;   (b) 

3.  By  the  intentional  cancellation  thereof  by  the  holder;   (c) 

4.  By  any  other  act  which  will  discharge  a  simple  contract  for 
the  payment  of  money; 

5.  TMien  the  principal  debtor  becomes  the  holder  of  the  instrument 
at  or  after  maturity  in  his  own  right,  (d) 

(a)  See  §  148  (88). 

(b)  See  §  55  (29). 

(c)  See  §  204  (123), 

(d)  See  §  80  (50). 

Sec.  201  (120).      TITien  Person  Secondarily  Liable  on,  Discharged, 
A  person  secondarily  liable  on  the  instrument  is  discharged: 

1.  By  any  act  which  discharges  the  instrument; 

2.  By  the  intentional  cancellation  of  his  signature  by  the  hold- 
er; (a) 

3.  By  the  discharge  of  a  prior  party; 

4.  By  a  valid  tender  of  payment  made  by  a  prior  party;  (b) 

5.  By  a  release  of  the  principal  debtor,  unless  the  holder's  right 
of  recourse  against  the  party  secondarily  liable  is  expressly  re- 
served; 

•  §§  110-125,  Colo.,  Conn..  D.  C,  Fla..  Mass.,  N.  C,  N.  D..  Or.,  Tenn.,  TTtah, 
Va..  and  Wash.;   §§  138^144,  Md.;  §§  127-133,  R.  L;   §§  1070  to  1G71)-U,  Wla. 


468  THE    NEGOTIABLE    INSTRUMENTS    LAW. 

6.  By  any  agreement  binding  upon  the  holder  to  extend  the  time 
of  payment  or  to  postpone  the  holder's  right  to  enforce  the  instrument^ 
unless  the  right  of  recourse  against  such  party  is  expressly  reserv- 
ed, (c) 

(a)  See  §  78  (48). 

(b)  The  Wisconsin  act  (§  167^1)  adds  a  subdivision  (4a1  as  follows:  "By 
giving  up  or  applying  to  other  purposes  collateral  security  applicable  to  the 
debt,  or,  there  being  in  the  holder's  hands  or  within  his  control  the  means  of 
complete  or  partial  satisfaction,  the  same  are  applied  to  other  purposes." 

(c)  The  Wisconsin  act  substitutes  for  subdivision  6  the  following:  "By  an 
agreement  binding  upon  the  holder  to  extend  the  time  of  payment,  or  to  post- 
pone the  holder's  right  to  enforce  the  instrument  unless  made  with  the  assent, 
prior  or  subsequent,  of  the  party  secondarily  liable,  unless  the  right  of  re- 
course against  such  party  Is  expressly  reserved,  or  unless  he  is  fully  in- 
demnified." 

The  acts  of  Colorado,  Connecticut,  District  of  Columbia,  Florida,  Massa- 
chusetts, North  Carolina,  North  Dakota,  Oregon,  Tennessee,  Utah,  Virginia, 
and  Washington  insert  after  "right  to  enforce  the  Instrument"  the  words  "un- 
less made  with  the  assent  of  the  party  secondarily  liable,  or." 

Sec.  202  (121).     Right  of  Party  who  Discharges  Instrument, 

Where  the  instrument  is  paid  by  a  party  secondarily  liable  thereon^ 
It  is  not  discharged;  but  the  party  so  paying  it  is  remitted  to  his  former 
rights  as  regards  all  prior  parties,  and  he  may  strike  out  his  own  and 
all  subsequent  indorsements,  and  again  negotiate  the  instrument^ 
except : 

1.  Where  it  is  payable  to  the  order  of  a  third  person,  and  has 
been  paid  by  the  drawer;  and, 

2.  Where  it  was  made  or  accepted  for  accommodation,  and  has 
been  paid  by  the  party  accommodated. 

Sec.  203  (122).     Renunciation  by  Holder, 

The  holder  may  expressly  renounce  his  rights  against  any  party 
to  the  instrument,  before,  at  or  after  its  maturity.  An  absolute  and 
unconditional  renunciation  of  his  rights  against  the  principal  debtor 
made  at  or  after  the  maturity  of  the  instrument,  discharges  the  in- 
strument. But  a  renunciation  does  not  affect  the  rights  of  a  holder 
in  due  course  without  notice.  A  renunciation  must  be  in  writing, 
unless  the  instrument  is  delivered  up  to  the  person  primarily  liable 
thereon. 


DISCHARGE    OF   NEGOTIABLE    INSTRUMENTS.  469 

Bee.  204  (123).     Cancellation;  Unintentional;  Burden  of  Proof. 

A  cancellation  made  unintentionally,  or  under  a  mistake,  or  with- 
out the  authority  of  the  holder,  is  inoperative;  but  where  an  instru- 
ment or  any  signature  thereon  appears  to  have  been  canceled  the 
burden  of  proof  lies  on  the  party  who  alleges  that  the  cancellation 
was  made  unintentionally,  or  under  a  mistake  or  without  authority. 

Sec.  205  (124).     Alteration  of  Instrument;  Effect  of. 

Where  a  negotiable  instrument  is  materially  altered  without  the 
assent  of  all  parties  liable  thereon,  it  is  avoided,  except  as  against 
3i  party  who  has  himself  made,  authorized  or  assented  (a)  to  the  al- 
teration and  subsequent  indorsers.  But  when  an  instrument  has 
been  materially  altered  and  is  in  the  hands  of  a  holder  in  due  course, 
not  a  pariy  to  the  alteration,  he  may  enforce  payment  thereof  ac- 
cording to  its  original  tenor.  . 

(a)  The  Wisconsin  act  (§  1679-5)  inserts  after  "assented,"  "orally  or  In 
writing." 

Sec.  206  (125).      What  Constitutes  a  Matetdal  Alteration. 
Any  alteration  which  changes: 

1.  The  date;  (a) 

2.  The  sum  payable,  either  for  principal  or  interest; 

3.  The  time  or  place  of  payment; 

4.  The  number  or  the  relations  of  the  parties; 

5.  The  medium  or  currency  in  which  payment  is  to  be  made; 

Or  which  adds  a  place  of  payment  where  no  place  of  payment  Is 
specified,  or  any  other  change  or  addition  which  alters  the  effect  of 
the  instrument  in  any  respect,  is  a  material  alteration-  (b) 

.     (a)  See  S  32  (13). 

?    (b)  See  J  33  (14). 


470  THE   NEGOTIABLE    INSTRUMENTS    LAW. 

AUTICLE  X.* 

BILLS   OF   EXCHANGE— FORM   AND   INTERPRETATION. 

Section  210.  Bill  of  Exchange  Defined. 

211.  Bill  not  an  Assignment  of  Funds  In  Hands  of  Drawee. 

212.  Bill  Addressed  to  More  than  One  Drawee. 
213  Inland  and  Foreign  Bills  of  Exchange. 

214.     When  Bill  May  be  Treated  as  Promissory  Notew 
215      Drawee  in  Case  of  Need. 

Sec.  210  (126).     Bill  of  Exchange  Defined, 

A  bill  of  exchange  is  an  unconditional  order  in  writing  addressee? 
by  one  person  to  another,  signed  by  the  person  giving  it,  requiring 
the  person  to  whom  it  is  addressed  to  pay  on  demand  or  at  a  fixed 
or  determinable  future  time  a  sum  certain  in  money  to  order  or  to 
bearer. 

See.  211  (127).     Bill  not  an  Assignment  of  Funds  in  Hands  of 
Drawee. 
A  bill  of  itself  does  not  operate  as  an  assignment  of  the  funds  In 
the  hands  of  the  drawee  available  for  the  payment  thereof  and  the 
drawee  is  not  liable  on  the  bill  unless  and  until  he  accepts  the  same. 

Bee.  212  (128).     Bill  Addressed  to  More  than  One  Drawee. 

A  bill  may  be  addressed  to  two  or  more  drawees  jointly,  whether 
they  are  partners  or  not;  but  not  to  two  or  more  drawees  in  the  al- 
ternative or  in  succession,  (a) 

(a)  The  Wisconsin  act  (§  1680b)  omits  "or  in  succession." 

Sec,  213  (129).     Inland  and  Foreign  Bills  of  Exchange. 

An  inland  bill  of  exchange  is  a  bill  which  is,  or  on  its  face  pur- 
ports to  be,  both  drawn  and  payable  within  this  state.  Any  other 
bill  is  a  foreign  bill.  Unless  the  contrary  appears  on  the  face  of  the 
bill,  the  holder  may  treat  it  as  an  inland  bill. 

Sec.   214  (130).      When  Bill  May  be  Treated  as  Promissory  Note. 

Where  in  a  bill  drawer  and  drawee  are  the  same  person,  or  where 
the  drawee  is  a  fictitious  person,  or  a  person  (a)  not  having  capacity 

10  §§  12G-131,  Colo.,  Conn.,  D,  C,  Fla.,  Mass.,  N.  C,  N.  D.,  Or.,  Tenn.,  Utah, 
Va.,  and  Wash.;  §§  145-150,  Md.;  §§  134-139.  R.  I.;   §§  1680-lGSOe,  Wis. 


BILLS   OF    EXCHANGE FORM    AND    INTERPRETATION.  471 

to  contract,  the  holder  may  treat  the  instrument,  at  his  option,  ei- 
ther as  a  bill  of  exchange  or  a  promissory  note, 
(a)  The  Wisconsin  act  (§  1680d)  omits  "or  a  person." 

Sec.  215  (131).     Referee  in  Case  of  Need. 

The  drawer  of  a  bill  and  any  indorser  may  insert  thereon  the  name 
of  person  to  whom  the  holder  may  resort  in  case  of  need,  that  is  to 
say,  in  case  the  bill  is  dishonored  by  non-acceptance  or  non-payment 
Such  person  is  called  the  referee  in  case  of  need.  It  is  in  the  option 
of  the  holder  to  resort  to  the  referee  in  case  of  need  or  not  as  he 
may  see  fit. 


472  IHE   NEGOTIABLE    INSTRUMENTS    LAW.  ' 

ARTICLE  XI." 

ACCEPTANCE    OP   BILLS    OP    EXCHANGa 

Section  220.  Acceptance,  How  Made,  et  cetera. 

221.  Holder  Entitled  to  Acceptance  on  Face  of  BilL 

222.  Acceptance  by  Separate  Instrument 

223.  Promise  to  Accept;  When  Equivalent  to  Acceptance, 

224.  Time  Allowed  Drawee  to  Accept. 

225.  Liability  of  Drawee  Retaining  or  Destroying  Bill. 
220.  Acceptance  of  Incomplete  BilL 

227.  Kinds  of  Acceptance. 

228.  "What  Constitutes  a  General  Acceptance. 

229.  Qualified  Acceptance, 

230.  Rights  of  Parties  as  to  Qualified  Acceptance. 

Sec.  220  (132).     Acceptance;  How  Made,  et  cetera. 

The  acceptance  of  a  bill  is  the  signification  by  the  drawee  of  his 
assent  to  the  order  of  the  drawer.  The  acceptance  must  be  in  writ- 
ing and  signed  by  the  drawee.  It  must  not  express  that  the  drawee 
will  perform  his  promise  by  any  other  means  than  the  payment  of 
money. 

Sec.  221  (133).     Holder  Entitled  to  Acceptance  on  Face  of  BiU, 

The  holder  of  a  bill  presenting  the  same  for  acceptance  may  re- 
quire that  the  acceptance  be  written  on  the  bill,  and  if  such  request 
is  refused,  may  treat  the  bill  as  dishonored. 

Sec.  222  (134).     Acceptance  by  Separate  Instrument 

Where  an  acceptance  is  written  on  a  paper  other  than  the  bill 
itself,  it  does  not  bind  the  acceptor  except  in  favor  of  a  person  to 
whom  it  is  shown  and  who,  on  the  faith  thereof,  receives  the  bill  for 
value. 

Sec.  223  (135).     Promise  to  Accept;  When  Equivalent  to  Acceptance. 

An  unconditional  promise  in  writing  to  accept  a  bill  before  it  is 
drawn  is  deemed  an  actual  acceptance  in  favor  of  every  person  who, 
upon  the  faith  thereof,  receives  the  bill  for  value. 

"  §§  132-142,  Colo.,  Conn.,  D.  C,  Fla.,  Mass.,  N.  C,  N.  D.,  Dr.,  Tenn.,  Utah, 
Va.,  and  Wash.;   §§  151-161,  Md.;   §§  140-150,  R.  L;   §§f  16S0f-lG80p,  Wia. 


ACCEPTANCE   OF   BILLS   OF   EXCHANGE,  473 

Sec.  224  (135).     Time  Allowed  Drawee  to  Accept. 

The  drawee  is  allowed  twenty-four  hours  after  presentment  in 
which  to  decide  whether  or  not  he  will  accept  the  bill;  but  the  ac- 
ceptance if  given  dates  as  of  the  day  of  presentation. 

Sec.  225  (137).     lAahility  of  Drawee  Retaining  or  Destroying  Bill. 

Where  a  drawee  to  whom  a  bill  is  delivered  for  acceptance  destroys 
the  same,  or  refuses  within  twenty-four  hours  after  such  delivery, 
or  within  such  other  period  as  the  holder  may  allow,  to  return  the 
bill  accepted  or  non-accepted  to  the  holder,  he  will  be  deemed  to  have 
accepted  the  same,  (a) 

(a)  The  Wisconsin  act  (§  16S0l£)  adds:  "Mere  retention  of  the  bill  Is  not 
acceptance." 

Sec.   226  (138).     Acceptance  of  Incomplete  Bill. 

A  bill  may  be  accepted  before  it  has  been  signed  by  the  drawer, 
or  while  otherwise  incomplete  (a),  or  when  it  is  overdue,  or  after  it 
has  been  dishonored  by  a  previous  refusal  to  accept,  or  by  non- 
payment. But  when  a  bill  pjayable  after  sight  is  dishonored  by  non- 
acceptance  and  the  drawee  subsequently  accepts  it,  the  holder,  in 
the  absence  of  any  different  agreement,  is  entitled  to  have  the  bill 
accepted  as  of  the  date  of  the  first  presentment. 

(a)  See  §  33  (14). 

Sec.  227  (139).     Kinds  of  Acceptances. 

An  acceptance  is  either  general  or  qualified.  A  general  accept- 
ance assents  without  qualification  to  the  order  of  the  drawer.  A 
qualified  acceptance  in  express  terms  varies  the  effect  of  the  bill  aa 
drawn. 

Sec.  228  (140).      Wliai  Constitutes  a  General  Acceptance. 

An  acceptance  to  pay  at  a  particular  place  is  a  general  acceptance 
unless  it  expressly  states  that  the  bill  is  to  be  paid  there  only  and 
not  elsewhere. 

Sec.  229  (141).      Qualified  Acceptance. 
An  acceptance  is  qualified,  which  is: 

1.  Conditional,  that  is  to  say,  which  makes  payment  by  the  ac- 
ceptor dependent  on  the  fulfilment  of  a  condition  therein  stated; 

2.  Partial,  that  is  to  say,  an  acceptance  to  pay  part  only  of  the 
amount  for  which  the  bill  is  drawn; 


474  THE    NEGOTIABLE    INSTRUMENTS    LAW. 

3.  Local,  that  is  to  say,  an  acceptance  to  pay  only  at  a  particular 
place;  (a) 

4.  Qualified  as  to  time; 

5.  The  acceptance  of  some  one  or  more  of  the  drawees,  but  not  of 
all.. 

(a)  See  §  228  (140). 

Sec.  230  (142).     Rights  of  Parties  as  to  Qnalified  Acceptance, 

The  holder  may  refuse  to  take  a  qualified  acceptance,  and  if  he 
does  not  obtain  an  unqualified  acceptance,  he  may  treat  the  bill  as 
dishonored  by  non-acceptance.  Where  a  qualified  acceptance  is  tak- 
en, the  drawer  and  indorsers  are  discharged  from  liability  on  the 
bill,  unless  they  have  expressly  or  impliedly  authorized  the  holder  to 
take  a  qualified  acceptance,  or  subsequently  assent  thereto.  When 
the  drawer  or  an  indorser  receives  notice  of  a  qualified  acceptance, 
he  must  within  a  reasonable  time  express  his  dissent  to  the  holder, 
or  be  will  be  deemed  to  have  assented  thereto. 


PRESENTMENT   OF    BILLS    OF    EXCHANGE    FOR    ACCEPTANCE,  475- 

ARTICLE  XII.^« 

PRESENTMENT  OP  BILLS  OF  EXCHANGE  FOR  ACCEPTANCB. 

Section  240,  When  Presentment  for  Acceptance  Must  be  Made. 

241.  When  Failure  to  Present  Releases  Drawer  and  Indorser, 

242.  Presentment;   How  Made. 

243.  On  what  Days  Presentment  May  be  Made, 

244.  Presentment;   Where  Time  is  Insufficient. 

245.  When  Presentment  is  Excused. 

246.  When  Dishonored  by  Non-Acceptance. 

247.  Duty  of  Holder  where  Bill  not  Accepted. 

248.  Rights  of  Holder  where  Bill  not  Accepted. 

Sec.  240  (143).      When  Presentment  for  Acceptance  Must  be  Made, 
Presentment  for  acceptance  must  be  made: 

1.  Where  the  bill  is  payable  after  sight,  or  in  any  other  case 
where  presentment  for  acceptance  is  necessary  in  order  to  fix  the 
maturity  of  the  instrument;  or, 

2.  Where  the  bill  expressly  stipulates  that  it  shall  be  presented 
for  acceptance;  or, , 

3.  Where  the  bill  is  drawn  payable  elsewhere  than  at  the  resi- 
dence or  place  of  business  of  the  drawee,  (a) 

In  no  other  case  is  presentment  for  acceptance  necessary,  in  order 
to  render  any  party  to  the  bill  liable, 
(a)  See  §  244  (147). 

Sec.  241  (144).  When  Failure  to  Present  Peleases  Drawer  and 
Indorser. 

Except  as  herein  otherwise  provided,  the  holder  of  a  bill  which  is 
required  by  the  next  preceding  section  to  be  presented  for  accept- 
ance must  either  present  it  for  acceptance  or  negotiate  it  within  a 
reasonable  time,  (a)  If  he  fails  to  do  so,  the  drawer  and  all  in- 
dorsers  are  discharged. 

(a)  See  §  4  (193). 

Sec.  242  (145).     Presentment;  ITow  Made. 

Presentment  for  acceptance  must  be  made  by  or  on  behalf  of  the 
holder  at  a  reasonable  hour  on  a  business  day,  and  before  the  bill 

12  §§  143-151,  Colo..  Conn.,  D.  C,  Fla.,  Mass.,  N.  C.  N.  D.,  Or.,  Tonu.,  Utah, 
Va.,  and  Wash.;   §§  1G2-170,  Md.;   §§  151-15t>.  U.  1.;   8§  IGSl  to  lUSl-8,  Wis. 


476  THE    NEGOTIABLE    INSTRUMENTS    LAW. 

is  overdue,  to  the  drawee  (a)  or  some  person  authorized  to  accept  or 
refuse  acceptance  on  his  behalf;  and 

1.  Where  a  bill  is  addressed  to  two  or  more  drawees  who  are  not 
partners,  presentment  must  be  made  to  them  all,  unless  one  has 
authority  to  accept  or  refuse  acceptance  for  all,  in  which  case  pre- 
sentment may  be  made  to  him  only;  (b) 

2.  "VNTiere  the  drawee  is  dead,  presentment  may  be  made  to  his 
personal  representative;  (c) 

3.  Where  the  drawee  has  been  adjudged  a  bankrupt  or  an  insol- 
vent, or  has  made  an  assignment  for  the  benefit  of  creditors,  present- 
ment may  be  made  to  him  or  to  his  trustees  or  assignee. 

(a)  "Drawer"  appeared  in  the  original  New  York  id,  a  mistake  which  has 
been  followed  in  some  other  states. 

(b)  See  §  229  (141),  subd.  5. 

(c)  See  §  245  (148),  subd.  1. 

Sec.  243  (146).     On   What  Days  Presenttnent  May  "be  Made, 

A  bill  may  be  presented  for  acceptance  on  any  day  on  which  nego- 
tiable instruments  may  be  presented  for  payment  under  the  provi- 
sions of  sections  132  and  145  of  this  act.  (a)  W^hen  Saturday  is  not 
otherwise  a  holiday,  presentment  for  acceptance  may  be  made  be- 
fore twelve  o'clock  noon  on  that  day.  (b) 

(a)  The  sections  were  referred  to  as  §§  72,  85,  by  mistalie  In  the  original 
New  Yorli  act. 

Cb)  The  Colorado  act  (§  146)  substitutes  for  the  last  sentence  the  following: 
"When  any  day  Is  in  part  a  holiday,  presentment  for  acceptance  may  be  made 
during  reasonable  hours  of  the  part  of  such  day  which  is  not  a  holiday." 

The  Wisconsin  act  (§  1G81-3)  omits  the  last  sentence. 

Sec   244  (147).     Presentment;    Where  Time  is  Insufficient, 

Where  the  holder  of  a  bill  drawn  payable  elsewhere  than  at  the 
place  of  business  or  the  residence  of  the  drawee  has  not  time  with 
the  exercise  of  reasonable  diligence  to  present  the  bill  for  accept- 
ance before  presenting  it  for  payment  on  the  day  that  it  falls  due, 
the  delay  caused  by  presenting  the  bOl  for  acceptance  before  pre- 
senting it  for  payment  is  excused  and  does  not  discharge  the  draw- 
ers and  indorsers.  (a) 

(a)  See  §  240  (143). 


PRESENTMENT   OF   BILLS    OF    EXCHANGE   FOB   ACCEPTANCS.  477 

Sec.  245  (148),      Where  Presentment  is  Excused. 

Presentment  for  acceptance  is  excused  and  a  bill  may  be  treated 
as  dishonored  by  non-acceptance  in  either  of  the  following  cases: 

1.  WTiere  the  drawee  is  dead  (a),  or  has  absconded,  or  is  a  ficti- 
tious person  or  a  person  not  having  capacity  to  contract  by  bill; 

2.  Where  after  the  exercise  of  reasonable  diligence,  presentment 
cannot  be  made; 

3.  Where  although  presentment  has  been  irregular,  acceptance 
has  been  refused  on  some  other  ground. 

(a)  See  §  242  (145),  subd-  2. 

Sec.  246  (149).      When  Dishonored  hy  Non- Acceptance. 
A  bill  is  dishonored  by  non-acceptance: 

1.  When  it  is  duly  presented  for  acceptance,  and  such  an  accept- 
ance as  is  prescribed  by  this  act  is  refused  or  cannot  be  obtained; 
or,, 

2.  When  presentment  for  acceptance  is  excused  (a)  and  the  bill  is 
not  accepted. 

(a)  In  North  CJarollna  act  (§  149)  "executed"  (sic). 

Sec.  247  (150).     Duty  of  Holder  where  Bill  not  Accepted. 

Where  a  bill  is  duly  presented  for  acceptance  and  is  not  accepted 
within  the  prescribed  time,  the  person  presenting  it  must  treat  the 
bill  as  dishonored  by  non-acceptance  or  he  loses  the  right  of  re- 
course against  the  drawer  and  indorsers.  (a) 

(a)  See  §  188  (117). 

Sec.  248  (151).     Rights  of  Holder  where  Bill  not  Accepted. 

When  a  bill  is  dishonored  by  non-acceptance,  an  immediate  right 
of  recourse  against  the  drawers  and  indorsers  accrues  to  the  holder, 
and  no  presentment  for  payment  is  necessary. 


478  THE    NEGOTIABLE   INSTRUMENTS    LAW. 

ARTICLE  Xin." 

PROTEST  OP  B1LL.S  OF   BXCHANGBL 

Section  200.  In  what  Cases  Protest  Necessary, 

2G1.  Protest;   How  Made. 

2G2.  Protest;   By  Whom  Made. 

263.  Protest;    When  to  be  Made. 

204.  Protest;   Where  Made. 

2G5.  Protest  Both  for  Non-Acceptance  and  Non-Payment. 

2(>G.  Protest  before  Maturity  where  Acceptor  Insolvent. 

2G7.  When  Protest  Dispensed  with. 

2G8.  Protest;   Where  Bill  is  Lost,  et  cetera. 

Sec.   260  (152).     In  vihat  Cases  Protest  Necessary. 

Where  a  foreign  bill  (a)  appearing  on  its  face  to  be  such  is  dis- 
honored by  non-acceptance,  it  must  be  duly  protested  for  non-accept- 
ance, and  where  such  a  bill  which  has  not  previously  been  dishon- 
oreil  by  non-acceptance  is  dishonored  by  non-payment,  it  must  be 
duly  protested  for  non-payment.  If  it  is  not  so  protested,  the  draw 
er  and  indorsers  are  discharged.  Where  a  bill  does  not  appear  on 
its  face  to  be  a  foreign  bill,  protest  thereof  in  case  of  dishonor  is 
unnecessary. 

(a)  See  §  213  (129). 

Sec.  261  (153).     Protest;  How  Made. 

The  protest  must  be  annexed  to  the  bill,  or  must  contain  a  copy 
thereof,  and  must  be  under  the  hand  and  seal  of  the  notary  making  it. 
and  must  specify: 

1.  The  time  and  place  of  presentment; 

2.  The  fact  that  presentment  was  made  and  the  manner  thereof; 

3.  The  cause  or  reason  for  protesting  the  bill; 

4.  The  demand  made  and  the  answer  given,  if  any,  or  the  fact  that 
the  drawee  or  acceptor  could  not  be  found. 

Sec.  262  (154).     Protest;  By  Wham  Made. 

Protest  may  be  made  by: 

1.  A  notary  public;  or, 

2.  By  any  respectable  resident  of  the  place  where  the  bill  is  dis- 
honored, in  the  presence  of  two  or  more  credible  witnesses. 

13  §§  152-lGO.  Colo.,  Conn.,  D.  C.  Fla.,  Mass.,  N.  C,  N.  D.,  Or.,  Tenn.,  Utah, 
Va..  and  Wash.;  §§  171-179.  Md.;   §§  lGO-168,  R.  I.;   §§  1G81-9  to  1G81-17,  Wis. 


PROTEST    OF    BILLS    OF    EXCHANGE.  479 

Sec.  263  (155).     Protest;    When  to  he  Made, 

When  a  bill  is  protested,  such  protest  must  be  made  on  the  day 
of  its   dishonor,   unless   delay   is  excused   as  herein   provided,    (a) 
When  a  bill  has  been  duly  noted,  the  protest  may  be  subsequently 
extended  as  of  the  date  of  the  noting. 
.  (a)  See  §  267  (159). 

Sec.  264  (156).     Protest;  Where  Made. 

A  bill  must  be  protested  at  the  place  where  It  is  dishonored,  except 
that  when  a  bill  drawn  payable  at  the  place  of  business  or  residence 
of  some  person  other  than  the  drawee,  has  been  dishonored  by  non- 
acceptance,  it  must  be  protested  for  non-payment  at  the  place  where 
it  is  expressed  to  be  payable,  and  no  further  presentment  for  payment 
to,  or  demand  on,  the  drawee  is  necessary. 

Sec.  265  (157).     Protest  Both  for  Non- Acceptance  and  Non-Payment. 

A  bill  which  has  been  protested  for  non-acceptance  may  be  subse- 
quently protested  for  non-payment- 
Sec.  266  (158).     Protest  before  Maturity  where  Acceptor  Insolvent. 

Where  the  acceptor  has  been  adjudged  a  bankrupt  or  an  insol- 
vent or  has  made  an  assignment  for  the  benefit  of  creditors,  before 
the  bill  matures,  the  holder  may  cause  the  bill  to  be  protested  for 
better  security  against  the  drawer  and  indorsers. 

Sec.  267  (159).      When  Protest  Dispensed  with. 

Protest  is  dispensed  with  by  any  circumstances  which  would  dis- 
pense with  notice  of  dishonor,  (a)  Delay  in  noting  or  protesting  is 
excused  when  delay  is  caused  by  circumstances  beyond  the  control 
of  the  holder  and  not  imputable  to  his  default,  misconduct,  or  neg- 
.ligence.  When  the  cause  of  delay  ceases  to  operate,  the  bill  must 
be  noted  or  protested  with  reasonable  diligence. 

(a)  See  §§  180  (109)  -186  (115),  188  (117). 

Sec.  268  (160).     Protest  where  Bill  is  Lost,  et  cetera. 

Where  a  bill  is  lost  or  destroyed  or  is  wrongly  detained  from  the 
person  entitled  to  hold  it,  protest  may  be  made  on  a  copy  or  wiiLten 
particulars  thereof. 


480  THE   NEGOTIABLE   INSTRUMENTS    LAW. 

ARTICLE  XIV.»« 

AOOBPTANCH  OF  BILLS  OF  EXCHANGE  FOR  HONOR. 

Section  280.  When  Bill  May  be  Accepted  for  Honor. 

28L  Acceptance  for  Honor;  How  Made, 

282.  When  Deemed  to  be  an  Acceptance  for  Honor  of  the  Drawee 

283.  Liability  of  Acceptor  for  Honor. 

284.  Agreement  of  Acceptor  for  Honor. 

285.  Maturity  of  Bill  Payable  after  Sight;  Accepted  for  Honor. 

286.  Protest  of  Bill  Accepted  for  Honor,  et  cetera, 

287.  Presentment  for  Payment  to  Acceptor  for  Honor;  How  Made, 

288.  When  Delay  In  Making  Presentment  is  Excused. 

289.  Dishonor  of  Bill  by  Acceptor  for  Honor. 

Sec  280  (161).      WTien  Bill  May  he  Accepted  for  Honor. 

Where  a  bill  of  exchange  has  been  protested  for  dishonor  by  non- 
acceptance  or  protested  for  better  security  and  is  not  overdue,  any 
person  not  being  a  party  already  liable  thereon  may,  with  the  con- 
sent of  the  holder,  intervene  and  accept  the  bill  supra  protest  for  the 
honor  of  any  party  liable  thereon  or  for  the  honor  of  the  person  for 
whose  account  the  bill  is  drawn. 

The  acceptance  for  honor  may  be  for  part  only  of  the  sum  for 
which  the  bill  is  drawn;  and  where  there  has  been  an  acceptance 
for  honor  for  one  party,  there  may  be  a  further  acceptance  by  a 
different  person  for  the  honor  of  another  party. 

Sec.  281  (162).     Acceptance  for  Honor;  How  Made. 

An  acceptance  for  honor  supra  protest  must  be  In  writing  and  indi- 
cate that  it  is  an  acceptance  for  honor,  and  must  be  signed  by  the 
acceptor  for  honor. 

Sec.  282  (163).      When   Deemed  to   he  an   Acceptance  for   Honor  of  the 
Drawer. 
Where  an  acceptance  for  honor  does  not  expressly  state  for  whose 
honor  it  is  made,  it  is  deemed  to  be  an  acceptance  for  the  honor  of 
the  drawer. 

Sec.  283  (164).     LiaMUty  of  Acceptor  for  Honor. 

The  acceptor  for  honor  is  liable  to  the  holder  and  to  all  parties 
to  the  bill  subsequent  to  the  party  for  whose  honor  he  has  accepted. 

1*  §§  161-170,  Colo.,  Conn.,  D.  C,  Fla.,  Mass..  N.  C,  N.  D.,  Or.,  Tenn.,  Utah, 
Va.,  and  Wash.;  §§  180-189,  Md.;  §§  169-178,  R.  L;  §§  1681-18  to  1681-27.  Wis. 


ACCEPTANCE    OF   BILLS    OF   EXCHANGE   FOB    HONOR.  481 

Sec.  284  (165).     Agreement  of  Acceptor  for  Honor, 

The  acceptor  for  honor  by  such  acceptance  engages  that  he  will 
on  due  presentment  pay  the  bill  according  to  the  terms  of  his  accept- 
ance, provided  it  shall  not  have  been  paid  by  the  drawee,  and  pro- 
vided also,  that  it  shall  have  been  duly  presented  for  payment  and 
protested  for  non-payment  and  notice  of  dishonor  given  to  him. 

Sec.  285  (166).     Maturity  of  Bill  Payable  after  Sight;  Accepted  for  Honor. 
"^Tiere  a  bill  payable  after  sight  is  accepted  for  honor,  its  maturity 
is  calculated  from  the  date  of  the  noting  for  non-acceptance  and  not 
from  the  date  of  the  acceptance  for  honor. 

Sec.  286  (167).     Protest  of  Bill  Accepted  for  Honor ^  et  cetera. 

Where  a  dishonored  bill  has  been  accepted  for  honor  supra  protest 
or  contains  a  reference  in  case  of  need,  it  must  be  protested  for  non- 
payment before  it  is  presented  for  payment  to  the  acceptor  for  honor 
or  referee  in  case  of  need. 

Sec.  287  (168),     Presentment  for  Payment  to  Acceptor  for  Honor;   Hou 
Made. 
Presentment  for  payment  to  the  acceptor  for  honor  must  be  made 
aa  follows: 

1.  If  it  is  to  be  presented  in  the  place  where  the  protest  for  non- 
payment was  made,  it  must  be  presented  not  later  than  the  day  fol- 
lowing its  maturity; 

2.  If  it  is  to  be  presented  in  some  other  place  than  the  place  where 
it  waa  protested,  then  it  must  be  forwarded  within  the  time  specified 
in  section  175.     (a) 

(a)  In  original  New  Yorli  act  "section  104"  by  mistake. 

Sec.  288  (169).      When  Delay  in  Making  Presentment  is  Excused' 
The  provisions  of  section  one  hundred  and  forty-one  (a)  applj 

where  there  is  delay  in  making  presentment  to  the  acceptor  for 

honor  or  referee  in  case  of  need. 

(a)  In  original  New  Yorli  act  "section  81"  by  mistake. 

Sec.  289  (170).     DisJumor  of  Bill  hy  Acceptor  for  ITonor. 

When  the  bill  is  dishonored  by  the  acceptor  for  honor  it  must  be 
protested  for  non-payment  by  him. 
NEG.BILLS.-31 


482  THB   NEGOTIABLE    INSTRUMENTS    LAW. 

ARTICLE  XV.  ** 

PATlfENT   OP   BILLS   OP   EXCHANGE  FOR  HONOR. 

Section  300.  Wh«  ma/  Make  Payment  for  Honor. 

801.  Payment  for  Honor;   How  Made. 

802.  Declaration  before  Payment  for  Honor. 

803.  Preference  of  Parties  Offering  to  Pay  for  Honor. 

804.  Effect  on  Subsequent  Parties  where  Bill  is  Paid  for  Honor, 

805.  Where  Holder  Refuses  to  Receive  Payment  Supra  Protest, 
80G.  Rights  of  Payer  for  Honor. 

Sec.  SOO  (171).      Who  may  Make  Payment  for  Honor. 

Where  a  bill  has  been  protested  for  non-payment,  any  person  may 
Intervene  and  pay  it  supra  protest  for  the  honor  of  any  person  liable 
thereon  or  for  the  honor  of  the  person  for  whose  account  it  waa 
drawn. 

Sec.  301  (172).     Payment  for  Honor;  How  Made. 

The  payment  for  honor  supra  protest  in  order  to  operate  as  such 
and  not  as  a  mere  voluntary  payment  must  be  attested  by  a  notarial 
act  of  honor  which  may  be  appended  to  the  protest  or  form  an  ex- 
tension to  it. 

Sec.  302  (173).     Declaration  before  Payment  for  Honor. 

The  notarial  act  of  honor  must  be  founded  on  a  declaration  made 
by  the  payer  for  honor  or  by  his  agent  in  that  behalf  declaring  his 
intention  to  pay  the  bill  for  honor  and  for  whose  honor  he  pays. 

Sec.  303  (174).     Preference  of  Parties  Offering  to  Pay  for  Honor. 

WTiere  two  or  more  persons  offer  to  pay  a  bill  for  the  honor  of 
different  parties,  the  person  whose  payment  will  discharge  most 
parties  to  the  bill  is  to  be  given  the  preference. 

Sec.  304  (175),  Effect  on  Suhtquent  Parties  where  Bill  is  Paid  for  Honor. 
Where  a  bill  has  been  paid  for  honor  all  parties  subsequent  to  the 
party  for  whose  honor  it  is  paid  are  discharged,  but  the  payer  for 
honor  is  subrogated  for,  and  succeeds  to,  both  the  rights  and  duties 
of  the  holder  as  regards  the  party  for  whose  honor  he  pays  and  all 
parties  liable  to  the  latter. 

11  J§  171-177,  Colo..  Conn..  D.  C,  Fla..  Mass.,  N.  0.,  N.  D.,  Or.,  Tenn.,  Utah, 
Va..  and  Wash.;  {§  190-196,  Md.;  §§  179-185,  R.  L;  {§  1681-28  to  1681-34.  Wla. 


PAYMENT   or   BILLS    OF    EXCHANGK   FOR    HONOR.  483 

Sec.  305  (176).      Where  Bolder  Refuses  to  Recewe  Payment  Suj^a 
Protest. 
Where  the  holder  of  a  bill  refuses  to  receive  payment  supra  pro- 
test, he  loses  his  right  of  recourse  against  anj  partj  who  would  have 
been  discharged  by  such  payment. 

Sec.  306  (177).     Rights  of  Payer  for  Horuyr, 

The  payer  for  honor  on  paying  to  the  holder  the  amount  of  the 
bill  and  the  notarial  expenses  incidental  to  its  dishonor,  is  entitled  to 
receive  both  the  bill  itself  and  the  protest. 


484  THE    NKGOTIABLE    INSTRUMENTS    LAW. 

ARTICLE  XVI." 

BILLS   IN   A   SET. 

B«ctIon  310.     Bill?  Jn  Sets  Constitute  One  BllL 

811.  Rights  of  Holders  where  Different  Parts  are  Negotiated. 

812.  Liability  of  Holder  who  Indorses  Two  or  More  Parts  of  a  Sot  to 

Different  Persons. 

813.  Acceptance  of  Bills  Drawn  In  Sets. 

314.  Payment  by  Acceptor  of  Bills  Drawn  In  Sets. 

315.  Effect  of  Discharging  One  of  a  Set 

Sec.  310  (178).     BUh  in  Sets  Qmstitute  One  Bill. 

Where  a  bill  is  drawn  in  a  set,  each  part  of  the  set  boin?  nnmbered 
and  containing  a  reference  to  the  other  parts,  the  whole  of  the  parts 
constitute  one  bill. 

Sec.  311  (179).     Rights  of  Holders  icJiere   Different   Parts  are  Negotiated, 

^\Tiere  two  or  more  parts  of  a  set  are  negotiated  to  different  hold- 
ers in  due  course,  the  holder  whose  title  first  accrues  is  as  between 
such  holders  the  true  owner  of  the  bill.  But  nothing  in  this  section 
affects  the  rights  of  a  person  who  in  due  course  accepts  or  pays  the 
part  first  presented  to  him. 

Sec.  312  (180).  Liability  of  Holder  who  Indorses  Two  or  More  Parts  of  a 
Set  to  Different  Persons. 
■^Tiere  the  holder  of  a  set  indorses  two  or  more  parts  to  different 
persons  he  is  liable  on  every  such  part,  and  every  indorser  subse- 
quent to  him  is  liable  on  the  part  he  has  himself  indorsed,  as  if  sucli 
parts  were  separate  bills. 

Sec.  313  (181).     Acceptance  of  Bills  Drawn  in  Sets. 

The  acceptance  may  be  written  on  any  part  and  It  must  be  writ- 
ten on  one  part  only.  If  the  drawee  accepts  more  than  one  part,  and 
such  accepted  parts  are  negotiated  to  different  holders  in  due  course, 
he  is  liable  on  every  such  part  as  if  it  were  a  separate  bilL 

Sec.  314  (182).     Payment  by  Acceptor  of  Bills  Drawn  in  Sets. 

When  the  acceptor  of  a  bill  drawn  in  a  set  pays  it  without  re- 
quiring the  part  bearing  his  acceptance  to  be  delivered  up  to  him, 

»•  §§  178-183.  Colo.,  Conn.,  D.  C,  Fla..  Mass..  N.  C,  N.  D..  Or..  Tenn.,  Utah, 
Va.,  and  Wash.;  SS  197-202,  Md.;  §§  186-191,  R.  L;  §S  1681-35  to  1681-40,  Wis. 


BILLS    IN    A    SET.  486 

and  that  part  at  maturity  is  outstanding  in  the  hands  of  a  holder  in 
due  course,  he  is  liable  to  the  holder  thereon. 

Sec.  315  (183).     Effect  of  Discharging  One  of  a  Set, 

Except  as  herein  otherwise  provided,  where  any  one  part  of  a  bill 
drawn  in  a  set  is  discharged  by  payment  or  otherwise  the  whole  bill 
is  discharged. 

[Note.  The  Wisconsin  act  here  inserts  an  article,  not  found  In  the  other 
acts,  entitled  "Damages  on  Bills,"  as  follows: 

§  16S2.  Whenever  any  bill  of  exchange  drawn  or  indorsed  within  this  state 
and  payable  without  the  limits  of  the  United  States  shall  be  duly  protested 
for  non-acceptance  or  non-payment  the  party  liable  for  the  contents  of  such 
bill  shall,  on  due  notice  and  demand  thereof,  pay  the  same  at  the  current  rate 
of  exchange  at  the  time  of  the  demand  and  damages  at  the  rate  of  five  per 
cent,  upon  the  contents  thereof,  together  with  interest  on  the  said  contents,  to 
be  computed  from  the  date  of  the  protest;  and  said  amount  of  contents,  dam- 
ages and  interest  shall  be  in  full  of  all  damages,  charges  and  expenses. 

§  1683.  If  any  bill  of  exchange  drawn  upon  any  person  or  corporation  out  of 
this  state,  but  within  some  state  or  territory  of  the  United  States,  for  the 
payment  of  money  shall  be  duly  presented  for  acceptance  or  payment  and 
protested  for  non-acceptance  or  non-payment  the  drawer  or  indorser  thereof, 
due  notice  being  given  of  such  non-acceptance  or  non-payment,  shall  pay  said 
bill  with  legal  Interest  according  to  its  tenor  and  five  per  cent  damages,  to- 
gether with  costs  and  charges  of  protest] 


486  THE   NEGOTIABLE    INSTRUMENTS    LAW. 

ARTICLE  XVII.^ 

PROMISSORY   NOTES  AND  CHECKS. 

Section  320.  Promissory  Note  Defined. 

821.  Check  Defined. 

822.  Within  what  Time  a  Check  Must  be  Presented. 

823.  Certification  of  Check;  EffLCt  of. 

824.  Effect  where  Holder  of  Check  Procures  It  to  be  Certified, 

825.  When  Check  Operates  as  an  Assignment. 

Sec.  320  (184).     Promissory  Note  Defined. 

A  negotiable  promissory  note  within  the  meaning  of  this  act  is  an 
unconditional  promise  in  writing  made  by  one  person  to  another 
signed  by  the  maker  engaging  to  pay  on  demand  or  at  a  fixed  or  de- 
terminable future  time,  a  sum  certain  in  money  to  order  or  to  bearer. 
Where  a  note  is  drawn  to  the  maker's  own  order,  it  is  not  complete 
until  indorsed  by  him. 

Sec.  321  (185).     Check  Defined. 

A  check  is  a  bill  of  exchange  drawn  on  a  bank  (a)  payable  on  de- 
mand. Except  as  herein  otherwise  provided,  the  provisions  of  this 
act  applicable  to  a  bill  of  exchange  payable  on  demand  apply  to  a 
check. 

(a)  See  §  2  (191)  "bank." 

Sec.  322  (186).      Within  what  Time  a  Check  Must  le  Presented. 

A  check  must  be  presented  for  payment  within  a  reasonable  time 
(a)  after  its  issue  or  the  drawer  will  be  discharged  from  liability 
thereon  to  the  extent  of  the  loss  caused  by  the  delay, 

(a)  See  $  4  (193). 

Sec.  323  (187).     Certification  of  Chech;  Effect  of. 

Where  a  check  is  certified  by  the  bank  on  which  it  is  drawn  the 
certification  is  equivalent  to  an  acceptance. 

Sec.  324  (188).     Effect  where  the  Holder  of  Check  Procures  it  to  he  Certified. 

Where  the  holder  of  a  check  procures  it  to  be  accepted  or  certified 

the  drawer  and  all  indorsers  are  discharged  from  liability  thereon. 

»T  iS  184-189.  Colo.,  Conn.,  D.  C,  Fla.,  Mass.,  N.  C,  N.  D.,  Or.,  Tenn.,  Utah, 
Ya.,  and  Waah.;  Si  203-208,  Md.;  S§  192-197,  R.  I.;  (§  1684  to  1684-5,  Wla. 


PROMISSORY    NOTES    AND   CHECKS.  487 

Sec.  325  (189).      When  Check  Operates  as  an  Assignment 

A  check  of  itself  does  not  operate  as  an  assignment  of  any  part 
of  the  funds  to  the  credit  of  the  drawer  with  the  bank,  and  the  bank 
is  not  liable  to  the  holder,  unless  and  until  it  accepts  or  certifies  the 
eheck. 


488  THE    NEGOTIABLE   INSTRUMENTS    LAW. 

ARTICLE  XVIII. » 

NOTES  GIVEN  FOR  A  PATENT  RIGHT  AND  FOR  A  SPECULATIVE 

CONSIDERATION. 

Section  n.10.     Ncfrotlnble'  Instrumonts  Given  for  Patent  Rights. 

3al.     Negotiable  Instruments  Given  for  a  Speculative  Consideration. 
332.    How  Negotiable  Bonds  are  Made  Non-Negotiable. 

Sec.  330.     Negotiable  Instruments  Given  for  Patent  Rights. 

A  promissory  note  or  other  negotiable  instrument,  the  consideration 
of  which  consists  wholly  or  partly  of  the  right  to  make,  use  or  sell 
any  invention  claimed  or  represented  by  the  vendor  at  the  time  of 
sale  to  be  patented,  must  contain  the  words  "given  for  a  patent  right" 
prominently  and  legibly  written  or  printed  on  the  face  of  such  note  or 
instrument  above  the  signature  thereto;  and  such  note  or  instrument 
in  the  hands  of  any  purchaser  or  holder  is  subject  to  the  same  de- 
fenses as  in  the  hands  of  the  original  holder;  but  this  section  does  not 
apply  to  a  negotiable  instrument  given  solely  for  the  purchase  price 
or  the  use  of  a  patented  article. 

Sec.  331.     Negotiable  Instruments  for  a  Speculative  Consideration, 

If  the  consideration  of  a  promissory  note  or  other  negotiable  instru- 
ment consists  in  whole  or  in  part  of  the  purchase  price  of  any  farm 
product,  at  a  price  greater  by  at  least  four  times  than  the  fair  market 
value  of  the  same  product  at  the  time,  in  the  locality,  or  of  the  mem- 
bership and  rights  in  an  association,  company  or  combination  to  pro- 
duce or  sell  any  farm  product  at  a  fictitious  rate,  or  of  a  contract  or 
bond  to  purchase  or  sell  any  farm  product  at  a  price  greater  by  four 
times  than  the  market  value  of  the  same  product  at  the  time  in  the 
locality,  the  words,  "given  for  a  speculative  consideration,"  or  other 
words  clearly  showing  the  nature  of  the  consideration,  must  be  promi- 
nently and  legibly  written  or  printed  on  the  face  of  such  note  or  in- 
strument above  the  signature  thereof;  and  such  note  or  instrument,  in 
the  hands  of  any  purchaser  or  holder,  is  subject  to  the  same  defenses 
as  in  the  hands  of  the  original  ow^ner  or  holder, 

>•  This  article  appears  only  in  New  York. 


NOTES    FOR    PATENT    RIGHT   AND   SPECULATIVE    CONSIDERATION.       489 

Sec.  832.     ^010  Negotiable  Bonds  are  Made  Non-Negotiable, 

The  owner  or  holder  of  any  corporate  or  municipal  bond  or  obliga- 
tion (except  such  as  are  designated  to  circulate  as  money,  payable  to 
bearer),  heretofore  or  hereafter  issued  in  and  payable  in  this  state, 
but  not  registered  in  pursuance  of  any  state  law,  may  make  such 
bond  or  obligation,  or  the  interest  coupon  accompanying  the  same, 
non-negotiable,  by  subscribing  his  name  to  a  statement  indorsed 
thereon,  that  such  bond,  obligation  or  coupon  is  his  property;  and 
thereon  the  principal  sum  therein  mentioned  is  payable  only  to  such 
owner  or  holder,  or  his  legal  representatives  or  assigns,  unless  such 
bond,  obligation  or  coupon  be  transferred  by  indorsement  in  blank, 
or  payable  to  bearer,  or  to  order,  with  the  addition  of  the  assignor's 

place  of  residence. 

ii 


TABLE  OF  CASES  CITED. 


[the  figures  refer  to  pages.] 


Abbott  V.  Hendricks,  193. 

V.  Winchester,  304. 
A.bel  V.  Alexander,  307. 
Adams  v.  Blethen,  109,  119. 

V.  Cordis,    173. 

V.  Darby,  3G6,  395. 

V.  Jones,  137. 

V,  King,  59,  60. 

V.  Leland,  358,  399,  400. 

V    Robertson,  184. 

V.  Wrigiit,  390. 
Adansonia  Co.,  In  re,  66. 
.^tna  Nat.  Bank  v.  Fourth  Nat,  Bank, 

419. 
Agawam  Bank  v.  Strever,  182. 
Agnew  V.  Bank  of  Gettysburg,  361. 
Agra  «S:  Masterman's  Bank  v.  Leigh- 
ton,  281. 
Akers  v.  Demond,  184-186. 
Alabama  Coal  Min.  Co.  v.  Brainard, 

81. 
Alderson  v.  Langdale,  248,  250. 
Aldrich  v.  Jackson,  174. 
Aldridge  v.  Branch  Bank,  287. 
Alexander  v.  Burchfield,  414,  415. 

V.  Strong.  338. 

V.  Thomas,  32,  35. 
Alger  V.  Scott,  39. 

V.  Thacher,  291. 
Allan  V.  Mawson,  58, 
Allen  V.  Brown,  12. 

V.  Cottil,   113. 

V.  Demlng.  286. 

V.  Edmonson,  390. 

V.  Edmundson.  383,  385. 

V.   Kescous,  288. 

V.  Suydam,  80,  341,  348. 
Allport  V.  Meek,  S.'Jl. 
Almich  V.  Downey,  72.  73. 
Almy  V.  Winslow,  Ki,  31. 

N  EG. BILLS  (491) 


Alves  V.  Hodgson,  185. 
American  Bank  v.  Jenness,  347. 
American  Exch.  Bank  v.  Blanchard, 

16. 
American   Exch.   Nat.   Bank   v.   New 

York  B.  &  P.  Co..  314. 
American  Nat.  Bank  v.  Mfg.  Co.,  384, 

395. 
American  Trust  &   Savings  Bank  v. 

Gluck,  183. 
Ames  V.  Meriam,  207,  417. 
Ancher  v.  Bank  of  England,  126,  321. 
Ancona  v.  Marks,  213. 
Anderson  v.  Drake,  73,  354,  400. 

V.  Hick,  93. 

V.  Pearce,  30,  66. 
Anderton  v.  Beck,  349. 

V.  Shoup,  66. 
Andrew  v.  Blachly,  75. 
Andrews  v.  Boyd,  402. 

V.  Chadbourne,  328,  330. 

V.  Franklin,  35. 

V.  German  Nat.  Bank,  422,  423. 

V.  Marrett,  308. 

V.  Pond,  186. 
Angle  V.  Insurance  Co.,  246. 
Aniba  v.  Yeomans,  158. 
Annville  Nat.  Bank  v.  Kettering,  401. 
Anonymous,  3,  194,  297,  353. 
Anthony  v.  Harrison,  275,  282,  32a 
Appleby  v.  Biddolph.  34. 
Archibald  v.  Argall.  20. 
Armistead  v.  Arniistead,  366w 
Armour  v.  McMlcliael,  312. 
Armstrong,  In  re,  90,  97. 

V.  Bank,  62. 

V.  Caldwell,  366. 

V.  Gibson.  243. 

V.  Harsh  man,   139. 
Arnold  v.  Bryant,  U2. 

V.  Clifford,  L'SS. 

V.  Dresser,  3-l(».  304. 


4U2 


CASES   CITED. 
[The  figures  refer  to  pages.] 


Arnold  v.  Rock  River  V.  U.  R.  Co.,  49, 

V.  Sprague,  7,  (JO,  74,  92. 
Arnot  V.  Pittstou  ct  K.  Coal  Co.,  291. 
Artcher  v.  Wbalen,  (59. 
Artisans'  Bank  v.  Backus,  374. 
Ashurst  V.  Royal  Bank  of  Australia, 

207. 
AtKius  V,  Johnson,  2S8. 
Atkinson  v.  Ilawdon,  255. 

V.  Mauks,  7,  75. 
Atlanta  Mining  &  Rolling  Mill  Co.  v. 

Gwyer.  239. 
Atlanta  Nat.  Bank  v.,  Davis,  427. 
Atlanta  Sav.  Bank  v.  Spencer,  243. 
Atlantic   Nat.   Bank  of  New  York  v. 

Franklin.  SIC. 
Atlas  Bank  v.  Doyle,  182.  316. 
AttenborouKli  v.  Mackenzie,  79,  296. 
Attorney  General  v.  Continental  Life 

Ins.  Co.,  419. 
Aubert  v.  Maze,  282. 
Auerbach  v.  Pritchett,  45. 
Aull  Sav.  Bank  v.  City  of  Lexington, 

224. 
Aurey  v.  Fearnsides,  52. 
Auriol  v.  Thomas,  IGO. 
Austin  V.  Iiuus,  189. 

V.  Munro.  64. 
Averett  v.  Booker,  7,  38,  75. 
Averill  v.  Wood,  81. 
Avery  v.  Stewart,  76,  77,  350. 
Awde  V.  Dixon,  259. 
Ayer  v.  Tilden,  244. 
Aymar  v.  Beers,  341,  346,  347. 

V.  Sheldon,  129,  344,  403. 
Ayres  v.  Campbell,  13. 


B 

Bachellor  v.  Priest,  299,  341,  361. 
Backhouse  v.  Harrison,  320. 
Backus  V.  Shipherd,  402. 
Bacon  v.  Burnham,  140. 

V.  Dyer,  366. 

T.  Fitch,  60. 

V.  Harris,  180. 
Badgley  v.  Votraln,  136L 
Baer  v.  Leppert,  362. 
Bailey  v.  Armstrong,  112. 

V.  Bank,  397. 

V.  Bid  well,  284,  334. 

V.  Dozier,  371. 

v.  Heald,  189. 
Balnbridge  v.  Firmstone,  273. 


Baird  v.  Underwood,  33* 
Baker  v.  Dening,  .55. 
Baldwin  v.  Bank,  133. 

V,  Killian,  283. 

v.  Van  Deusen,  168. 
Balfour  v.  Sea  Fire  Life  Assur.  Co., 

272. 
Ball  V.  Allen,  58. 

V.  Powers,  287. 
Ballard  v.  Greenbush,  295. 

V.  Insurance  Co.,  248. 
Ballingalls  v.  Gloster,  157,  161,  342, 
Bank  v.  Godfrey,  223. 

V.  Orvis,  353. 
Banker  v.  Banker,  229. 
Bank  of  Albion  v.  Smith,  115. 
Bank    of    Alexanc'j-i*    v.    MandeviUe, 
239. 

V.  Swann,  76,  390,  391,  416. 

V.  Young,  367. 
Bank  of  America  v.  Shaw,  389. 
Bank    of    British    North    America    v. 

Merchants'  Nat.  Bank,  257. 
Bank  of  Burlington  v.  Raymond,  341. 
Bank  of  Chenango  v.  Hyde,  181,  182, 

315. 
Bank  of  Columbia  v.  Lawrence,  385- 

388,  392. 
Bank  of  Commerce  v.  Bogy,  8, 

V.  Chambers,  389, 

V.  Goos,  427, 

V.  Union  Bank,  55,  146,  148,  151, 
251, 
Bank    of    Cumberland    v.    Mayberry, 

286,  287. 
Bank  of  England  v.  Newman,  21,  206, 
363. 

V.  Vagliano,  63,  431. 
Bank  of  Ft.  Edward  v.  Washington 

County  Bank,  210. 
Bank  of  Genesee  v.  Bank,  67,  224,  225. 
Bank  of   Ireland   v.   Archer,  96,   100, 
101. 

V,  Beresford,  179. 
Bank  of  Jamaica  v.  Jefferson,  134. 
Bank  of  Kentucky  v.  Wister,  206. 
Bank  of  Limestone  v.  Penick,  252. 
Bank  of  Marietta  v.  Pindall,  106. 
Bank  of  Metropolis  v.  Breut,  355. 

V.  New  England  Bank,  312, 
Bank  of  Michigan  v.  Ely,  99. 

v.  Niles,  224. 
Bank  of  Missouri  v.  Wright,  48. 
Bank    of    New    York    v.    Muskingum 
Branch  Bank  of  Ohio,  225. 


CASES  CITED. 
[The  figures  refer  to  pages.] 


493 


Baok  of  New  York  v.  Vanderhorst,  315. 
Bank  of  Old  Dominiou   v.   McVeigh, 

373. 
Bank  of  Orleans  v.  Merrill,  3L 

V.  Whittemore.  72,  358. 
Bank  of  Pittsburgh  v.  Neal,  259,  321. 
Bank  of  Republic  v.  Millard,  426. 
Bank  of  Rochester  v.  Gray,  161. 
Bank  of  Rutland  v.  Buck,  181,  315. 

V.  Woodruff,  425. 
Bank  of  Salina  v.  Babcock,  310,  314. 
Bank  of  Sandusky  v.  Scoville,  310. 
Bank   of   Syracuse   v.   HoUister,   351, 

35G. 
Bank   of   United    States   v.   Bank   of 
Georgia,  148. 

V.  Carneal,  378,  389. 

V.  Corcoran,  385. 

V.  Daniel,  20,  24,  408. 

V.  Davis,  380. 

V.  Goddard,  380,  382. 

V.  Norwood,  386. 

V.  Smith,  172,  359. 

V.  United  States,  171,  297,  299. 

V.  Waggener,  237. 
Bank  of  Utica  v.  Bender,  385. 

V.  Philips,  351. 

V.  Smith,  351,  361,  379,  382. 
Bank  of  Washington  v.  Reynolds,  400. 

V.  Triplett.  341,  350.  353. 
Barbor  v.  Boehm,  279. 
Barbour  v.  Fullerton,  347. 
Barclay  v.  Bailey,  352. 

V.  Minchin,  24. 
Bardsley  v.  Delp,  315. 
Baring  v.  Clark,  155. 
Barker  v.  Bradley,  7L 

V.  Casidy,  176. 

V.  Hall,  386. 

V.  Mechanics'  Fire  Ins.  Co.,  225. 

V.  Parker,  77. 

V.  Sterne,  259. 
Barlow  v.  Bishop,  221. 

V.  Myers,  133. 
Barnes  v.  Vaughan,  354,  357,  363. 
Barnet  v.  Smith,  91. 
Barnett  v.  Juday,  56. 

V.  Offerman,  180. 
Barney  v.  Earle,  312. 

V.  Newcomb,  80. 

V.  Worth ington,  99. 
Barough  v.  White,  172. 
Barret  v.  Kvans,  38(!. 
Barrett  v.  Allen,  77.  350. 


Barrett  v.   May,  110. 

V.  Wills,  357,  3U9. 
Barrick  v.  Austin,  U. 
Barriere  v.  Nairac,  16. 
Barry  v.  Equitable  Assur.  Soc,  263. 

V.  Morse,  115,  401. 
Bartlett  v.  Robinson,  389. 

V.  Smith,  245. 

V.  Tucker,  66. 
Bartrum  v.  Caddy,  295,  296. 
Bass  V.  Clive,  148, 
Bassenhorst  v.  Wilby,  41,  207. 
Bassett  v.  Avery,  327. 
Batavian  Bank  v.  McDonald,  306. 
Bateman  v.  Joseph.  354. 
Bathe  v.  Taylor,  250. 
Batsford  v.  Every,  286. 
Battle  v.  Weems,  180,  212. 
Baxendale  v.  Bennett,  260,  303. 
Bay  v..  Coddington,  313. 
Bayard  v.  Shunk,  279. 
Bayerque  v.  City  of  San  Francisco,  37. 
Bayley  v.  Taber,  68,  235. 
Beach  v.  Bank,  183. 

V.  Wise,  206. 

V.  Zimmerman,  307. 
Beal  V.  City  of  Somerville,  125. 
Beale  v.  Parrish,  3S9. 
Beals  V.  See,  227,  231. 
Bearce  v.  Barstow,  237. 
Beard  v.  Root,  308. 
Beardesley  v.  Baldwin,  34. 
Beatty's  Estate  v.  Western  College,  36, 
Beck  V.  Robley,  298. 

V.  Thompson,  350. 
Becker's  Investment  Agency  v,  Rea, 

243. 
Beckwith,  In  re,  231. 
Bedell  v.  Carll,  206. 
Beecher  v.  Bucl<ingham,  10. 
Beeching  v.  Gower,  350. 
Begbie  v.  Levi,  285. 
Behrens  v.  McKeuzie,  228,  231. 
Belcher  v.  Smith,  109. 
Belden  v.  Hann,  113. 

V.  Lam  I).  241,  244. 
Bel  ford  v.  Bangs.  129. 
Bell  V.  Alexander,  417. 

V.  Beau,  31(5. 

V.  Dagg.  1(!8.  174, 

v,  Hagerstown  Bank,  387. 

V.   Iiigcstre.  70, 

V.  Maliin,  247. 

V.   Pacivnrd,  ISS. 
Bellamy  v.  Majoribuuks.  79. 


494 


CASES  CITED. 
[The  flguNB  refer  to  pages.] 


Belhisis  v.  Hester.  76,  103. 

Bt'liuout   Branch    of    State    Bank    v. 

llof,'e.  320. 
Bunedict  v.  Cowden,  123,  253. 

V.  Miner,  250. 

V.  Scbmieg,  3G4,  387. 
Benjamin  v.  Tillman,  74. 
Bennett  v.  Faruell,  G2. 

V.  Smith,  243. 
Bennington  v.  Dinsmore,  59. 
Bennison  v.  Jewison,  245. 
Bentiuck  v.  Dorrien,  88. 
Benton  v.  Martin,  70,  71,  123. 
Berkley  v.  Cannon,  233. 
Berkshire  Bank  v.  Jones,  402. 
Berridge  v.  Fitzgerald,  389. 
Berry  v.  Robinson,  209. 

V.  Southern  Bank,  398. 
Besancon  v.  Shirley,  43. 
Bickerdike  v.  Bollman,  394. 
Bickford  v.  First  Nat.  Bank,  415. 
Bicknall  v.  Waterman,  21,  169. 
Bierce  v.  Stocking,  194. 
Bigelow  V.  Colton.  139,  206. 

V.  Stilphen.  255. 
Bilderback  v.  Burlingame,  75. 
I'.illgerry  v.  Branch,  398. 
Billing  V.  Devaux,  98. 
Billings  V.  Collins,  199. 
Bird  V.  Daggett,  183,  225. 
Birdsall  v.  Russell,  13,  321. 
Bishop  V.  Curtis,  198. 

V.  Hayward,  135. 

V.  Rowe,  21. 
Bissell  V.  Lewis,  100,  184. 
Bitzer  v.  Wagar,  205. 
Black  V.  Caffe,  144. 

V.  Ridgway,  194,  281. 

V.  Ward,  46. 
Blackburn,  Ex  parte,  20.. 
Blackhan  v.  Doren,  396. 
Blackstone  Bank  v.  Hill,  307. 
Blade  v.  Noland,  255,  302. 
Blair  v.  Bank  of  Tennessee,  356,  366, 

V.  Wilson,  404,  408,  418. 
Blake  v.  McMillen,  364. 
Blakemore  v.  Wood,  329. 
Blakeslee  v.  Hewett,  141. 
Blanchard  v.  Stevens,  312. 
Blanckenhagen  v.  Blundell,  60t 
Blandin  v.  Wade,  339. 
Blatchford  v.  Melliken,  113. 
Blenn  v.  Lyford,  laS,  296. 
Blesard  v.  Hirst,  158. 
Blethen  v.  Levering,  164. 


Bliss  V.  Matteson,  288. 
Block  V.  Bell,  30,  57,  58. 
Blodgett  V.  Durgiu.  187. 
Blont  V.  Proctor,  293. 
Bloss  V.  Bloomer,  288. 
Blossom  V.  Grithn,  71. 
Boalt  V.  Brown,  251. 
Buardman  v.  Spooner,  5& 
Bock  V.  Lauman,  241. 
Bodley  v.  Higgins,  69. 
Boehm  v.  Garcias,  82. 
Bogy  V.  Keil,  395. 
Bolton  V.  Dugdale,  52. 
Bonar  v.  Mitchell,  371. 
Bond  V.  Farnham,  397. 

V.  Fitzpatrick,  207. 
Bonner  v.  Nelson,  267. 
Bookstaver  v.  Jayne,  71,  123* 
Booth  V.  Powers,  248,  255. 

v.  Robinson,   223,   224. 
Borden  v.  Clerk,  121. 
Born  V.  First  Nat.  Bank,  423. 
Borough  v.  Perkins,  370. 
Bossange  v.  Ross,  241. 
Bottum  v.  Scott,  275,  328. 
Boulton  V.  Welsh,  376,  37a 
Bowen  v.  Bryne,  245. 

V.  Newell,  187,  350,  406,  409. 

V.  Stoddard,  173. 
Bower  v.  Hastings,  180,  212. 
Bowling  V.  Harrison,  386,  387,  416. 
Bowman  v.  McChesney,  40. 
Bowyer   v.    Bampton,    164,    194,    195, 

234,  235. 
Boyce  v.  Edwards,  100. 

V.  Smith,  230. 
Boyd  V.  City  Sav.  Bank,  384,  388. 

V.  Cleveland,  401,  402. 

V.  Corbitt,  125,  215. 

V.  Emmerson,  425. 
Boynton  v.  Page,  285. 

V.  Pierce,  113,  142. 
Bradlaugh  v.  De  Rin,  188. 
Bradley  v.  Davis,  385. 

V.  Delaplaine,  406. 
Brady  v.  Chandler,  30. 
Bragg  V.  Danielson,  302. 
Braham  v.  Bubb,  34. 
Brailsford  v.  Williams,  379. 
Braithwalte  v.  Gardiner,  149. 
Braman  v.  Hess,  175. 
Brandt  v.  Mlckle,  367. 
Bray  v.  Had  wen,  392. 
Brayley  v.  Kelly,  55. 
Break  v.  Cole,  288,  329. 


OASES  CITED. 
[Th«  flgurea  rafer  to  pages.] 


495 


Breckinridge  v.  Ralls,  43. 
Brenneban  v.  Furniss,  114. 
Brenzer  v.  Wightman,  391. 
Brewer  v.  Boynton,  135. 
Brewster  v.  Dana,  113. 

V.  McCardell.  72. 

V.  Shrader,  317,  431. 
Breyfogle  v.  Beckley,  172. 
Bridgeford  v.  Mfg.  Co.,  339. 
Bridgeport  Bank  v.  Welch,  312. 
Bridges  v.  Berry,  368. 

V.  Winters,  247. 
Brigg  V.  Hilton,  280. 
Briggs  V.  Boyd,  182. 

V.  Dorr,  202. 

V.  Latham,  109,  188. 

V.  Merrill,  324. 

V.  Partridge,  67. 
Brigham  v.  Fayerweather,  227. 

V.  Marean,  213. 
Bright  V.  Furrier,  342. 
Brill  V.  Tuttle,  8,  38.  39. 
Brimhall  v.  Van  Campen,  287. 
Brind  v.  Hampshire,  137. 
Brindley  v.  Barr,  387. 
Bringham  v.  Lighley,  281, 
Bristol  V.  Warner,  7.  274. 
Bristow  V.  Sequeville,  185, 
Bntton  V.  Dierker,  249. 

V.  Hall,  211. 
Bromage  v.  Lloyd,  69,  l.'iT. 
Bromwich  v.  Lloyd,  4. 
Brcok  V.  Hook,  2.j6. 

V.  Teague,  112. 
Brooklyn  C.  &  N.  R.  Co.  T.  NaMonal 

Bank.  31L 
Brook  man  v.  Mlllbank,  333. 
Brooks  V.  Elkins.  30. 

V.  Hargr^aves,  35,  51- 

V.  Higby,  356. 

y.  Mitchell,  209.  345,  848 
Brewer  v.  Fisher,  230. 
Brown,  In  re,  400,  409. 

T.  Butchers'  &  Drovera'  Bank,  65, 
108,  407. 

T.  Callaway,  318. 

V.  Cronise,  369. 

V.  Curtiss,  110. 

V.  Davies,  207. 

V.  Donnell,  226. 

V.  Ferguson,  373.  391,  892. 

V.  Harraden,  .3.')0. 

V.  Jodrell,  227. 

V.  Jones,  84,  251.  859. 

V.  Jordhal,  25. 


Brown  v.  Leavitt  310,  315. 

V.  Leckie,  423. 

V.  Lusk,  406. 

V.  Maffey,  395. 

V.  Mott,  175,  179,  211, 

V.  Reed,  2.j4. 

V.  St.  Charles,  71. 

V.  Taber,  181. 

V.  Turner,  362,  364. 
Browne  v.  Joddiell,  2:J1. 
Browning  v.  Kinnear,  354. 
Bruce  v.  Wright,  123. 
Brush  V.  Scribner,  312,  315. 
Bruyn  v.  Russell,  275. 
Bryant  v.  Eastman,  201. 

V.  Faries,  130. 

V.  Lord,  401. 

V.  Merchants'  Bank,  40L 

V.  Pember,  281. 
Buchanan  v.  Hubbard,  219. 
Buckley  v.  Briggs,  224. 

V.  Hann,  137. 

V.  Jackson,  322. 
Buckner  v.  Finley,  416. 
Bull  V.   Bank,  45,  406,  408,  413,  415, 
417. 

V.  Rice,  237. 

V.  Sims,  14.5. 
Bullard  v.  Randall.  79,  409,  419. 
Buller  V.  Crips.  3,  197. 
Bullock  V.  Taylor.  52. 
Burbridge  v.  Manners.  296. 
Burchell  v.  Slocock,  6. 
Burchfleld  v.  Moore.  246,  250,  253. 
Burgess  v.  Merrill.  218. 

V.  Northern    Bank,  256. 

V.  Pollock,  2:{0. 
Burke  v.  Allen,  2:u. 

V.  Dulaney,  71. 

V.  McKay.  24.  371.  418. 
Burmester  v.  Barron,  3S9. 
Burnap  v.  Cook.  114,  118. 
Burnes  v.  Scott,  19.3. 
Burnham  v.  Webster,  402, 
Burns  v.  Rowland.  315. 
Burr  V.  Smith,  300. 
Burrill  v.  Smith,  16.5. 
Burritt  v.  Tirtmarsh.  .367. 
Burrough  v.  Moss.  208. 
Burrows  v.   Klunk,  216,  254. 
Riirson  v.  Huutin^rtoii,  fW,  268. 
Hurtnctt  v.  (Jwyiine.  12. 
Burton  v.  Stewart,  280. 
Biissard  v.  Levering.  77,  350.  S88. 
Butler  V.  Paine,  44. 


496 


CASES  CITED. 
[Tb«  flguret  refer  to  pacea.] 


Buxton  V.  Jones,  161,  355. 

B.  &  W,  Beemau  v.  Duck,  331, 


Cabbott  V.  Radford.  245. 
Cabot  Bank  v.  Morton.  170. 

V.  Warner,  387. 
Cady  V.  Bradsbaw,  402. 

V.  SLepard,  141. 
Caister  v.  Eccles,  10. 
Calder  v.  Billington,  203L 
Callahan  v.  Bank,  384. 
Callauan  v.  Edwards,  197, 
Callott  V.  Haigh,  307. 
Callow  V.  Lawrence,  298. 
Camden  v.  McKoy,  113,  141. 
Camden  Bank  v.  Hall,  247. 
Came  v.  Brigbam,  224. 
Camidge  v.  Allenby,  279,  368. 
Cammer  v.  Harrison,  344. 
Campbell  v.  French,  76,  344. 

V.  Pettengill,  85. 

V.  Sloan,  240. 

V.  Weister,  43. 

V.  Wilcox.  245. 
Campbell  Printing  Press  &  Mfg.  Co. 

V.  Jones,  172. 
Canadian     Bank     of     Commerce     v. 

Coumbe,  150. 
Canajoharie  Nat.  Bank  v.  Diefendorf, 

320,  334. 
Canal  Bank  v.  Bank  of  Albany,  148, 

257,  331. 
Cannan  v.  Bryce,  293. 
Canon  v.  Grigsby,  247. 
Cape  Ann  Nat.  Bank  v.  Burns,  254. 
Capp  V.  Lancaster,  344. 
Capron  v.  Capron,  36. 
Cardwell  v.  Hicks,  316. 

V.  Martin,  242. 
Carew  v.  Duckworth,  396. 
Carll  V.  Brown,  347. 
Carlon  v.  Kenealy,  41,  42. 
Carlos  V.  Fancourt,  37. 
Carnegie  v.  Morrison,  97. 
Carnwright  v.  Gray,  6,  74,  274,  275. 
Carolina  Nat.  Bank  v.  Wallace,  385, 

387. 
Carpenter  v.  Greenop,  207, 

V.  Snelling,  245. 
Carrick  v.  Vickery,  202. 
Carrier  v.  Cameron,  334. 
Carroll  v.  Weld,  142. 


CarroUton  Bank  r.  Tayleur,  08. 
Carruthers  v.  West,  17tj,  180. 
Carter  v.  Bank,  370.  403. 

V.  Beckwith,  229. 

V.  Bradley,  376. 

V.  Burley,  370,  391.  392. 

V.  Dowuish,  3. 

V.  Flower,  395. 

V.  Moulton,  71. 

V.  Smith,  359. 
Cartwright  v.  Williams,  137. 
Carver  v.  Hayes,  74. 
Carvick  v.  Vlekery.  133. 
Cary  v.  Bancroft,  13. 

V.  White,  308. 
Casborne  v.  Dutton,  29. 
Casco  Nat.  Bank  v.  Clark,  67. 

V.  Shaw,  388. 
Case  V.  Burt,  103. 

V.  Hall,  20. 

V.  Henderson,  419. 

V.  Mechanics'  Banking  Ass'n,  332. 
Cash  V.  Kennion,  48. 
Cashman  v.  Harrison,  157. 
Cassel  V.  Dows,  97. 
Castrique  v.  Buttigieg.  157, 
Cathell  V.  Goodwin,  396. 
Catlin  V.  Gunter,  68. 
Caulkins  v.  Fry,  234. 

V.  Whisler,  260. 
Caunt  V.  Thompson,  374,  394. 
Cayuga  Bank  v.  Bennett,  383. 

V.  Warden,  129,  376,  377,  384. 
Cayuga  Co.  Bank  v.  Hunt,  351,  364. 
Cazet  V.  Field,  235,  285,  287. 
C.    C.    Thompson    &    W^alkup    Co.    T. 

Appleby,   384. 
Cecil   V.  Hicks,   172. 
Central  Bank  v.  Allen,  358,  400. 

V.  Davis,  113,  401. 

V.  Hammett,  320,  324. 
Central  Nat.  Bank  v.  Railroad  Co.,  25. 
Central  Trust  Co.  v.  Bank,  109,  133, 

203. 
Chadwick  v.  Allen,  59. 
Chaffe  V.  Ludeling,  245. 
Chaffee  v.  Jones,  56. 
Challiss  V.  McCrum,  120,  168, 
Chalmers  v.  Lanion,  210,  326. 
Chamberlyn  v.  Delarlve,  365. 
Chambers  v.  Union  Bank,  117, 
Champion  v.  Gordon,  406. 
Chandler  v.   Temple,   70. 
Chanoine  v.  Fowler.  379. 
Chapin  v.  Dobson,  71. 


CASES  CITED. 
[Tbe  figures  refer  to  pages.] 


497 


Cbapman  v.  Black,   243. 

V.  Cottrell,   U9. 

V.  Keaae.   380,  382. 

V.  Kellogg,  304. 

V.  Rose,  205. 

V,  White,  TO,  419. 
Chappel   V.    Brockway,    290. 
Chappelear  v.  Martin,  297. 
Chappell   V.   Bissell,   70.   136. 

V.  Spencer,    253. 
Charles  v.  Marsden,  150,  179,  180,  211. 
Chartiers    &    Robinson    Turnpike    Co. 

V.   McXamara,   245. 
Chase  v.  Hathorn,  1&4. 
Chaters  v.  Bell,  309. 
Chatham  Bank  v.  Allison,  403. 
Cheek  v.  Roper,  357,  303. 
Cheever  v.  Railroad  Co.,  322. 
Chemical  Electric  Light  &  Power  Co. 

V,  Howard,  793. 
Chemung    Canal    Bank    v.    Bradner, 

183. 
Chenault  v.   Bush,  279. 
Chester  v.  Dorr,  179,  180,  212. 
Chicago    Railway    Equipment    Co.    v. 

Bank,  42. 
Chick  V.  Pillsbury,  391. 
Chicopee  Bank  v.  Philadelphia  Bank, 

356. 
Childs  V.  Monins,  65. 
Chillicothe  Branch  of  State  Bank  v. 

Fox,  67,  366. 
Chipman  v.  Foster,  67. 

V.  Tucker,  68,  71. 
Cholmeley  v.  Darley,  123,  253. 
Chouteau  v.  Webster,  388,  389. 
Chrysler  v,  Renois,  43,  314,  315. 
Church  V.  Barlow,  177,  380. 

V.  Clapp,  209. 

V.  Howard,  252. 
Citizens'  Nat.  Bank  v.  Brown,  44. 

V.  Cade,  388. 

V.  Piollet,  32,  35. 

V.  Richmond,  246,  251. 
Citizens'   Nat.   Bank  of  Davenport  v. 

Importers'  &  Traders'  P.ank,  257. 
City  Bank  v.  Barnard,  285. 

V.  Cutter,  77. 
City  of  Aurora  v.  West,  235. 
City  of  Lexington  v.  Hiitler.  206. 
City  of  Muscatine  v.  Sterneman,  245. 
Claflln  V.  Boorum.  182,  243. 

V.  Lenheim,  321. 
Clanin  v.  .Madiine  Co.,  71. 
Clark  V.  Blarkstock.  252. 
NEG.BILLS.-32 


Clark  V.  Callison,  203. 

V.  King,  11,  45. 

V.  Manufacturing  Co.,  25. 

V.  Muudal,   20,  21. 

V.  Pease,  194,  270,  334,  ^ 

V.  Phillips,   214. 

V.  Sisson,  182. 

V.  Tanner,  265. 

V.  Whitaker,  203. 
Clarke  v.  Dunham,  228. 

V.  Johnson,   268. 

V.  Patrick,  11.5. 

V.  Percival,  38,  52. 

V.  School  Dist.,  224. 
Clason  V.  Bailey,  56. 

V.  Morris,  305,  306. 
Clayton  v.  Gosling,  74. 
Clerk  V.  Martin,  4. 
Cleveland  &  M.  R.  Co.  v.  Himrod  Fur- 
nace Co.,  223. 
Clift  V.  Rodger,  332. 
Cline  V.  Guthrie,  68. 
Clinton  Nat.  Bank  v.  Graves,  287. 
Olode   V.    Bayley,   380. 
Clofiin  V.  Boorum,  239. 
Clough  V.  Davis,  287. 
Clute    V.    Small,    255. 
Glutton  V.  Attenborough,  63. 
Cobb  V.   Doyle,  312. 
Cock  V.  Fellows,  133,  20L 
Cockle  V.  Flack,  239. 
Coddington  v.  Davis,  402. 
Coffin  V.  Loring,  75. 
Coggill  V.  American  Exch.  Bank,  164, 

256,  331. 
Cohea  v.  Hunt,  351. 
Cohen  v.  Hale,  428. 
Colburn   v.  Averill,   142, 
Cole  V.  Bank,  132. 

V.  Gushing,   114. 

V.  Sackott,  20. 

V.  Saulpaugh.  181,  182. 
Colehan   v.   Cooke.   35. 
Coleman   v.   Biedmau,  213. 

V.  Sayer,  348. 
Collanier  v.  Laiigdon,  21. 
Collier  v.  Nevill,  175. 
Collins  v.   Butler,  354. 

V.  Denning,  314. 

V.  (;ill)ert,   12,  333. 

V.  Lincoln,  4."?. 

V.  LocUe.    291. 

V.   Martin,  .'{.'{O. 
Collolt   V.   Ilaigli.   15a 
Culms  V.  Bank,  350. 


49S 


CASES  CITED. 
[The  figures  refer  to  pages.] 


Colorado  Nat.  Bank  v.  Boettcher,  94, 

419. 
Colson  V.  Arnot,  117.  255. 
Colt  V.  Baiuard.  208. 
Commercial  Bank  v.  Armstrong,  125. 

V.  Hamer,  351. 

V.  Varuum.  24,  370,  371. 
Commercial  Bank  of  Buffalo  v.  War- 
ren, 247. 
Commercial  &  Farmers'  Nat.  Bank  v. 

First  Nat.  Bank,  421. 
Commissioners  of  Iredell  Co.  v.  Was- 

son,  115. 
Commissioners  of  Marion  Co.  v.  Clark, 

327. 
Commonwealth  v.  Butterick,  61,  108. 

V.  Ray,   407. 
Comstock  V.  Hannah,  321. 

V.  Hier,   313. 
Condit  V.  Baldwin,  237. 
Condon  v.  Pearce,  164. 
Conklin  v,  Gandall,  332. 

V.  Vail,   312. 
Connelly  v.  McKean,  103. 
Connor  v.  Martin,  221. 
Conover  v.  Earl,  132. 
Conrad  v.  Kinzie,  286. 
Continental   Life  Ins.   Co.   v.  Barber, 

308. 
Continental   Nat.    Bank   v.    M.   Corn- 
hauser  &  Co.,  422. 

V.  Townsend,    315. 
Cook  V.  Darling.  350. 

V.  Lister,    183,   296. 

V.  Litchfield,  375. 

V.  Moffat,    188. 

V.  Norwood,    195. 

V.  Satterlee,  48. 

V.  Wright,  272. 
Cooke  V.  State  Nat  Bank,  421. 

V.  United  .States,  268. 
Coolidge  V.  Payson,  96. 

V.  Ruggles,  11,  35. 
Cooper  V.  Dedrick,  132. 

V.  Earl  of  Waldegrave,  189. 

V.  Meyer,  148,  331. 
Corbett  v.   Clark,  40. 

V.  State,  35. 
Corcoran  v.  Powers,  241. 

V.  White,  80. 
Cordier  v.  Thompson,  70. 
Corney  v.  Da  Costa,  394,  397. 
Corning  v.  Pond.  243. 
Cory  V.  Scott.  395. 
Costelo  V.  Crowell,  51, 


Coster  V.  Thomason,  383, 
Cota  V.  Buck,  36. 
Cotes  V.  Davis,  202. 
Couch  V.  Meeker,  71. 

V.  Waring,  305. 
Coulter  V.  Uiclmiond,  141. 
Coward  v.  Hughes,  273. 
Cowie  V.  Halsall,  250. 

V.  Stirling,   60. 
Cowing  V.  Altman,  68,  72. 
Cowles  V.  Harts,  378. 

V.  McVickar,    175. 
Cox  V.  Bank,  SO.  357,  359. 

V.  Boone,    415, 

V.  Coleman,  93. 

V.  Hodge,   296. 

V.  Keinhardt,   76. 

V.  Troy,  89. 
Coy  V.  Stiner,  55. 
Coj'e  V.  Palmer.  244. 
Craft  V.   Fleming,   120. 
Cram  v.  Hendricks.  172,  175,  239,  243, 

244. 
Crandall  v.  Schroeppel,  339. 

V.  Vickery,  325. 
Crane  v.  Price,  243. 
Crauson  v.  Goss,  287. 
Crawford  v.  Bank,  189,  249,  405. 
Craythorne  v.   Swinburne,  306. 
Creamer  v.  Perry,  397. 
Creveling  v.   Bloomsbury  Nat.   Bank, 

419. 
Crider  v.  Shelby,  35. 
Crim  V.  Starkweather,  345. 
Crippon  v.  Culver,  228. 
Crist  V.  Crist,  198. 
Crocker  v.  Getchell,  115. 
Cromwell  v.  Arrott,  345. 

V.  County  of  Sac,  172,  317. 

V.  Hewitt,   8,    14,    142. 
Cronise  v.  Kellogg,  179. 
Crook  V.  Jadis,  320,  351. 
Crosby  v.  Grant,  321. 

V.  Roub,  196. 
Crosman  v.  Feller,  71, 
Crosse  v.  Smith,  373. 
Crossley  v.  Ham,  207. 
Crossmore  v.  Page,  41, 
Crouch  V.  Credit  Foncier  of  England, 

16,  197. 
Crowley  v.  Barry,  364. 
Cruchley  v.  Clarance,  60,  258. 
Cruchly  v.  Mann,  2.58. 
Cruger  v.  Armstrong,  329. 
Culver  V.  Bigelow,  239. 


CASES  CITiBD. 
ITbe  figures  refer  to  pages.] 


4Xi9 


Culver  V.  Robinson,  46. 
Cumber  v.  Wane,  21. 
Cummings  v.  Boyd,  194. 

V.  Kent  401. 

V.  Thompson,  334. 

V.  "Williams,  238. 
Cundy   v.    Marriott,   355. 
Currie  v.   Misa,  270,   312. 
Currier  v.  Locliwood,  29,  31. 
Curtis    V.    Leavitt,   224. 

V.  Sprague,    114. 

V.  State  Bank,  387. 
Cushing  V.   Gore,  408. 
Cushman  v.  Haynes,  52. 
Cussea  v.  Brandt,  300. 
Cutler  V.  Welch,  293. 
Cuyler  v.  Stevens,  129,  373,  384, 


D 


Dabney  v.  Stidger,  383. 
Dacosta  v.  Davis,  184. 
Daggett  V.  Daggett,  16. 

V.  Whiting,    181. 
Dale  V.  Gear,  113. 

Dalrymple   v.   Hillenbrand,    165.   331. 
Dana  v.  Boston  Third  Nat.  Bank,  419. 

v.  Sawyer,  352. 
Dane  v.  Kirliwall,  231. 
Daniels  v.  Wilson,  317. 
Dann  v.  Norris,  137. 
Darbishire  v.  Parker,  390,  391, 
Darnell  v.  Williams,  281. 
Darrow  v.  Walker,  273. 
Darwin  v.  Kippey,  252. 
David  V.  Bank,  2(J5. 
Davidson  v.  Cooper,  247. 
Davis  V.  Brown,  120. 

V.  Clarke,  58,  87. 

V.  French,  65. 

V.  Garr,  61. 

V.  Gowen,    387. 

V.  Graham,  307. 

V.  Jones,   72. 

V.  McCready,   282. 

V.  Miller,  211. 

V.  Morgan,  115. 

V.  Randall.    177. 
Davis  Sewing  Mach.  Co.  v.  Best,  268. 
Davren  v.  White.  230. 
Dawkes  v.  Lord  I)e  Lorane,  37,  38. 
Dawson  v.  Goodyear,  180. 

V.  Mcfarty,  245. 
Day  V.  Lyon,  113. 


Day  V.  Pool,  280. 

v.  Saunders,  314. 

V.  Thompson,   115. 
Dayton  v.  Moore,  238. 

V.  Trull,  365. 
Dean  v.  Carruth,  6,  70,  74. 

V.  Hall,  112. 
Deberry  v.  Darnell,  47. 
De  Forest  v.  Frary,  35. 

V.  Strong,   239. 
De  La  Chaumette  v.  Bank,  186,  205. 
Delano  v.  Bartlett,  275. 
Delaware,  L.  &  W.  R.  Co.  v.  Gilbert, 

65. 
Demond  v.  Burnham,  72. 
De  Mott  V.   Starkey,  325. 
Den  V.  Clark,  229. 

V.  Wright,  247. 
Dennett  v.  Goodwin,  50. 
Dennie  v.  Walker,  357,  400. 
Dennis  v.  Morrice,  394. 
Denniston  v.   Bacon,   181. 
Dennistoun  v.  Stewart,  309,  370,  416. 
Depau  V.  Humphreys,  185. 
De  Pauw  v.  Bank  of  Salem,  107. 
Des  Arts  v.  Leggett,  339. 
Desha  v.  Stewart,  79. 
De  Silva  v.  Fuller,  297. 
Desilver's  Estate,  In  re,  227. 
Detrick  v.   McGlone,   281. 
Deuters  v.  Townsend,  207. 
De  Wald's  Estate,  34. 
Dewey  v.  Reed,  251. 
De  Witt  V.  Walton,  67. 
De  Wolf  V.  Johnson,  241. 

V.  Murray,  1(51,  377. 
Dexter  v.  Hall,  227. 
Diamond   Match    Co.    v.   Roeber,   291. 
Dick  V.  Leverich,  257. 
Dickins  v.  Beal,  24,  371,  396,  408. 
Dickinson  v.  Hall,  280. 
Dill  V.  White,  56. 
Dlnsmore  v.   Duncan,  258. 
District  of  Columbia   v.  Cornell,  803. 
Dix  V.  Van  Wyck,  240. 
Dixon  V.  Dixon.  312.  315. 

V.  Nuttali,  41,  344. 
D.  M.  Osborne  &  Co.  v.  Hubbard.  25. 
Dobree  v.   Eastwood,  382,  387,  393. 
Dod  v.  Edwards.  302. 
Dodge  V.  Bank.  391,  420. 

v.  Emerson.    52. 
Dodson    V.   Tayh)r,   383. 
Dole  V.  (iohl.  ;i76,  :<7.S. 
Donnelly  v.  Howie,  396. 


600 


CASES   CITED. 
[Tbe  figures  refer  to  pages.] 


Doolittle  V.   Ferry.   115. 

Doreiuus  v.   Bond,  281. 

Doriuan  v.  Dibdiu,  172. 

Dorsey  v.  Wolff.  T)!. 

Doubleday    v.    Kress.    134.    297,    299, 

3(11. 
Dougal  V.  Cowles.  20. 
Dougherty  v.  Deeuey.  300. 
Douglass  V.  Matting.  2t>5,  268. 

V.  Wilkeson,   59.   131,   132. 
Dowues  V.   Cluucb,   25. 
Downey  v.  Ilieks,  20. 
Downing   v.    Hat-kenstoes,   L 
Downs  V.  Collins,  US. 
Dows    V.    Kidder.    326. 
Drake  v.    Rogers,   72,   287. 
Draper  v.  Clemens,  339,  357,  363. 
Dresser  v.   Missouri  &  I.  Ry.  Const. 

Co..  Ill,  320. 
Drum   V.    Drum,   247. 
Drunimond  v.  Drummond,  58. 
Dry  Dock  Bank  v.  American  Life  In- 
surance &  Trust  Co.,   237. 
Dubois  V.  Mason,  110,  139. 
Dubose   V.   "Wheddon,   220. 
Dubuys  V.   Farmer,   76. 
Dudley  v.  Wells,  245. 
Dud  man  v.  Earl,  118. 
Duel  V.  Spence.   182. 
Dufaur  v.  Oxenden,  90. 
Dull  V.  Bricker,  81,  100. 
Dumont  v.  Williamson,  120,  168. 
Dunavan  v.   Flynn,  89,  94. 
Duncan  v.  Berlin,  79. 

V.  Gilbert.  182.  316. 

V.  Instituriou,    7(i,   237. 

V.  McCullougb.  357,  367. 

V.  Morrison,  195. 

V.  Scott,    270,    332,    333. 
Dunham   v.   Clogg.  258. 

V.  Dey.    237. 
Dunlop   V.   Gregory,   275,  291. 
Dunn  V.  Weston.  181,  182,  21L 
Dunnent  v.  Tuttle,  281. 
Dunning   v.    Heller,    106. 
Dunscomb  v.   Bunker,  184. 
Duran  v.  Ayer,   172. 
Durant  v.  Bnnta.  172. 
Durgin  v.   Bartol.   17. 

V.  Ireland,    12. 
Durham   v.   Mnnrow.   130. 
Durkln  v.  Cranston,  25. 
Dutchess  Co.  Mut.  Ins.  Co.  v.  Hach- 

field,  323. 
Duvall  V.  Bank,  397. 


D wight  V.  Pease,  133. 
Dykers     v.     Leather    Alanufacturerg' 
Bank,  408. 


Eadie  v.  Slimmon,  269. 

Eads  V.  City  of  Caroudelet,  80. 

Eagle  Bank  v.  Chapiu,  391. 

V.  Hathaway,    387. 
Eaglechilde's  Case,  2. 
Eales  V.  Dicker,  329. 
Eames  v.  Crosier,  202,  208. 
Earl  V.  Peck,  70,  277. 
Earle  v.  Reed,  220. 
East   V.   Smith,   381. 
Easter   v.   Miuard,   235. 
Easterly  v.  Barber.  135. 
Eastman   v.   Plumer.   297.   300. 

V.  Shaw,  68,  71. 
Easton   v.   Pratchett,    193,   278. 
East  River  Bank  v.  Butterworth,  21. 
Eastwood  V.  Kenyon,  273. 
Eaton  V.  Alger,  215,  238. 

V.  Aspiuwall,  226. 
Eberhart  v.  Page,  14L 
Eckert  v.  Pickel,  248. 
Eckhert  v.  Ellis,  212. 
Ecton  V.  Halan,  12. 
Edgar  v.  Boies,  45. 

V.  Chute,  3. 
Edge  V.  Bum  ford.  203. 
Edgerly  v.  Shaw,  219. 
Edgerton  v.  Edgerton,  7. 
Edie  V.  East  India  Co.,  117,  125,  127, 

129,  201. 
Edis  V.  Bury.  58. 
Edmonds  v.  Cates,  377. 
Edmunds  v.  Groves,  194. 
Edney  v.  Willis,  208. 
Edson  V.  Fuller,  100. 
Edwards   v.   Davenport,   227. 

V.  Dick.  164. 
Ehrichs  v.  De  Mill,  8,  38,  39. 
El  ford  V.  Teed,  351. 
Elgin  City  Banking  Co.  v.  Zelch,  109, 
Eliason  v.  Henshaw,  80. 
Elliot  V.   Ince.  227.  231. 

V.  Miller.   100. 

V.  Wood,  240. 
Ellis  V.  Rank,  40.3. 

V.  Brown.    134. 

V.  Mason,  30. 
Ellison  V.  Collingridge,  28,  30. 

V.  Jackson  W^ater  Co.,  81. 


CASES   CITED. 
[The  figures  refer  to  pages.] 


501 


Ellsworth  V.  Brewer,  114,  329. 
Elsam  V.  Denny,  295. 
Elting  V,  Brincherhoff,  341, 
Ely  V.  Clute,  5G. 

V.  James,   21. 
Emery  v.  Bartlett,  275. 
Emly   V.    Lye.   206. 
Emmett  v.  Tottenham,  213. 
English  V.  Darley,  306. 
Epler  V.  Funk,  322. 
Ernst  V.  Crosby,  293. 

V.  Steckman,  36. 
Erwin  v.  Adams,  358,  399. 

V.  Downs,  165. 

V.  Lynn,  113. 
Espy  V.  Bank  of  Cincinnati,  117,  421, 

425. 
Essex  Co.  Nat.  Bank  v.  Bank  of  Mon- 
treal, 423. 
Estabrook  v.  Smith,  202. 
Estes  V.  Shoe  Co.,  417. 
Etheridge  v.  Gallagher,  193,  210. 

V.  Ladd,  339. 
Evans   v.   Anderson,   184. 

V.  Cramlington,  126. 

V.  Foreman,  248. 

V.  Gee,  106,   113,  342. 

V.  Kymer,  181,  314. 

V.  Williamson,  280. 
Everard  v.  Wilson,  377. 
Everson  v.  Carpenter,  219. 
Evertson  v.  Bank,  13,  16. 
Exchange  Bank  v.  Hubbard,  184. 

V.  Rice,  98. 
Exchange  Nat.  Bank  v.  Bank  of  Lit- 
tle Rock.  246.  254. 
Exeter  Bank  v.  Gordon,  342. 


Faikney  v.  Reynous,  294. 
Fairchild  v.  Railroad  Co.,  50,  59,  145. 
Fairland  v.  Percy,  65. 
Fairley  v.  Roch,  154, 
P'ales  V.  Russell,  .S39. 
Fall  River  Nat.  Bank  v.  Walton,  339. 
Fanning  v.  Consequa,  186. 
Fant  V.  Millor.  185. 
Farmers'  Bank  v.  Duvall,  357,  391. 
V.  Gunnell,  399. 
V.  Noxon,  181. 
Farmers'  Bank  of  Kentucky  v.  Ewlng, 
40L 


Farmers'  &  Citizens'  Bank  v.  Noxon, 

264,  326,  334. 
Farmers'   &  M.  Bank  v.   Battle,  386. 

V.  Butchers'     &    Drovers'     Bank, 
225,  421. 
Farmers'    &    Merchants'    Ins.    Co.    v. 
Needles,  226. 

V.  Joslyn,    240. 
Farnam  v.  Brooks,  230. 
Farnsworth  v.  Allen.  352. 
Farnum  v.  Brooks,  230. 

V.  Fowle,  77. 
Farr  v.  Ricker,  115. 
Farrington   v.   P'rankford  Bank,  314. 
Farwell  v.  Curtis,  415. 

V.  Trust  Co.,  401. 
Fassin  v.  Hubbard,  109,  121,  383. 
Faulder  v.  Silk,  229. 
Favor  v.  Philbrick,  293. 
Fawsett  v.  National  Life  Ins.  Co.,  16L 
Fay  V.  Guynon,  10. 

V.  Smith,  251. 
Fearing  v.  Clark,  71,  267. 
Federick  v.  Winans,  137. 
Fenn  v.  Harrison,  108,  20a 
Fenton  v.  Robinson,  265. 
Fentum  v.  Pocock.  307. 
Ferguson  v.  Davis,  85. 
Fernandez  v.  Lewis,  347. 
Ferner  v.  Williams,  359. 
Fernon  v.  Farmer,  16. 
Ferris  v.   Bond.  56,  59. 

V.  Brush,    269. 
Fetters  v.  Muncie  Nat.  Bank,  180, 
Field  v.  Nickerson,  345,  347. 
Fielden  v.  Lahens,  322. 
Fielding  &  Co.  v.  Corry,  380. 
Findlay  v.  i:iall,  172. 
Firman  v.  Blood,   142. 
First  Nat.  Bank  v.  Bank,  415. 

V.  Frlcke,  248. 

V.  Glsh,  419. 

V.  Grant,  180. 

V.  Green.  264,  .333,  334. 

V.  Grludstaff,  235. 

V.  Hall.   67,   133. 

v.  Harris,  417. 

V.  Larsen,  51. 

V.  Leach,  422-424. 

V.   Mc.Micliai-l,  425. 

v.  Mfg.  Co..  259. 

V.  Miller.    115. 

V.   N('C(lli;uii.    117. 

V.  I'ayue,   139. 


502 


CASES  CITED. 
[The  figures  refer  to  pages.J 


First  Nat  Bank  v.  Price,  41,  344. 

V.  Kyersou.   373. 

V.  Skeen,   3G. 

V.  Slaughter,  51. 

V.  Slette.    43,    53. 

V.  Solleuberyer,   12. 

V.  Whitman.  409.  419.  423.  426. 
First  State  Sav.  Bank  v.  Webster,  258. 
Firth  V.  Brooks,  415. 

V.  Thrush,    379. 
Fish   V.   First  Nat.   Bank  of  Detroit, 
1(>4. 

V.  French,  207. 
Fisher  v.  Beckwith.  339. 

V.  Fisher,   312. 

V,  Leland.  210,  3ia 

V.  Leslie,  29,  31. 

V.  Pom  fret.  59. 

V.  Samuda,  280. 

V.  Sharpe,  280. 
Fitch  V.  McDowell,  178. 
Fltchburg  Bank  v.  Greenwood,  120. 

V.  Perley,  392. 
Fitchburg  Ins.  Co.  v.  Davis,  378. 
Fitzhugh  V.  Wilcox.  228. 
Fletcher  v.  Chase,  280. 

V.  Pierson,  417. 

V.  Thompson,  48. 
Fleury  v.  Tufts.  33. 
Flint  V.  Flint,  132. 

V.  Rogers,  351. 
Florence  Min.  Co.  v.  Brown,  421. 
Florida  Cent.  R.  Co.  v.  Schutte,  317. 
Fobes  V.  Cantfield,  239. 
Foden  v.  Sharp,  80,  356. 
Fogarties  v.   State  Bank.  418. 
Folger  V.  Chase,  108.  133. 
Follett  V.  Moore,  48. 
Folsom  V.  Bartlett,  209. 
Foote  V.  Emerson.  237. 
Forbes  v.  Omaha  Nat.  Bank,  386. 
Ford  V.  Angelrodt,  83. 
Forman  v.  Wright,  282. 
Forward  v.  Thompson.  31. 
Foster  v.  Dawber,  302. 

V.  Julien,  399,  400. 

V.  Mackinnon,  265.  266. 

V.  Shattuck,   62. 
Fourth  Nat.  Bank  v.  City  Nat.  Bank 
of  Grand  Rapids,  418. 

V.  Heuschen,  3ft4,  383. 
Fourth  St.  Nat  Bank  v.  Yardley,  419. 
Fowler  v.  Brantly.  .322. 

V.  Bush.  21. 

V.  Strickland,  17a 


Fraker  v.  Little.  257. 
Fralick    v.    Norton,    51. 
Francia  v.  Joseph.  312. 
Frank  v.  Lanier,  168,  257. 

V.  Lillieufeld.  258. 
Franklin  v.  March,  30,  74,  275. 

V.  Twogood,  8. 
Franklin  Bank  v.  Freeman,  407. 

V.  Raymond.  361. 
Frazer  v.  D'Invilliers,  120. 
Frazier  v.  Massey,  220. 

V.  Trow's   Printing  &   Bookbind- 
ing Co.,  72. 
Freakley  v.  Fox,  303. 
Free  v.  Hawkins.  401. 
Freeman  v.  Boynton,  339,  354,  361. 

V.  Ellison,  68. 

V.  Perry,  133. 
Freeman's  Bank  v.  Perkins,  39L 

V.  Rollins,  308. 

V.  Ruckman,  137,  186. 
Freese  v.  Brownell,  186,  188. 
Freiberg  v.  Cody,  415. 
French  v.  Bank  of  Columbia,  395. 

V.  Grindle.  244. 

V.  Jarvis,  213. 

V.  Turner,  108. 
Freund  v.  Bank,  89,  134.  202,  423. 
Friedlander  v.  Texas  &  P.  Ry.  Co..  18. 
Friend  v.  Wilkinson.  388. 
Frost  V.  Inhabitants  of  Belmont  289. 
Fry  V.  Fry,  269. 

V.  Hill,  346,  347. 

V.  Reusseau,    43. 
Fugure  v.  Mutual  Soc.  of  St.  Joseph, 

81. 
Fuller  V.   Dame.  289. 

V.  McDonald,  401. 
Fullerton  v.  Bank  of  U.  S.,  339,  391. 

V.  Hill,   109. 

V.  Rundlett,   401. 

V.  Sturges,  258. 
Funk  V.  Babbitt,  58. 
Furman  v.  Haskin,  345. 
Furze  v.  Sharwood.  378,  379. 
Fydell  v.  Clark,  206. 


Gage  V.  Kendall,  214. 
Galbraith  v.  Fullerton,  307. 
Gale  V.  Kemper.  3.55. 

V.  Miller,    68. 

V.  Walsh.  158,  369.  370. 


CASES  CITED. 
[The  figures  refer  to  pagei.] 


503 


Gallagher  v.  Roberts,  20. 

V.  White,  133. 
Gallery  v.  Prindle,  37. 
Gamble  v.  Grimes,  281. 
Gammon  v.  Schmoll,  85. 
Gantt  V.  Mackenzie,  160. 
Garden  v.  Maynard,  296. 
Gardner  v.  Gardner,  269. 

V.  Maxey,  290. 

V.  Maynard,  295,  29a 

V.Walsh,  252. 

V.  Watson,   307. 
Garland,  Ex    parte,  64. 
Garner  v.  Fite,  71. 
Garnett  v.  McKewan,  428. 

V.  Woodcocli,  351,  390. 
Garrard  v.  Haddan,  268. 
Garvin  v.  Wiswell,  12. 
Gascoyne  v.  Smith,  345,  346. 
Gates  V.  Beecher,  357,  364. 
Gay   V.  Rainey,  188. 

V.  Rooke,   29. 
Gayoso  Sav.  Inst.  v.  Fellows,  196. 
Gazzara  v.  Armstrong,  155,  301. 
Geary  v.  Physic,  55,  108. 
Geib  V.  Reynolds,  20. 
Geill  V.  Jeremy,  391. 
General   South   Americjin   Co.,   In   re, 

173. 
Genesee  Bank  v.  Patchin  Bank,  225. 
George  v.  Surrey,  55. 
Georgia  Nat.  Bank  v.  Henderson,  406. 
German  v.  Ritchie,  173. 
Germania  Bank  v.  Distler,  72,  329. 
Gettysburg  Nat.  Bank  v.  Chisolm,  246. 
Gibb  V.  Mather,  359. 
Glbbs  V.  Cannon,  399. 

V.  Fremont,  189. 

V.  Linabury,  266. 
Gibson   V.   Cooke,  419. 

V.  Minet,  16,  33,  59. 

V.  Smith,  82. 

V.  Tobey,    21. 
GIffert  V.  West,  168. 
Gifford  V.  Harden,  415. 
Gilbert  v.  Dennis.  373,  376,  378,  384. 
Gill  V.  Cubit.  320. 

V.  Palmer,  374. 
Gillespie  v.  Ilannahan,  358. 
Gillett  V.  Averill,  3.'')5. 
Gillham  v.  Bank,  113. 
GiUilan  V.   Myers,  51. 
Gllmore  v.   Hirst.  ."2. 
Gllson  V.  Stevens  Mfg.  Co.,  195. 


Girard  Bank  v.  Bank  of  Penn    Tp., 

422. 
Gist  V.  Lybrand,  380,  387,  400. 
Gladwell  v.  Turner,  391. 
Glasgow  V.  Pratte,  384. 
Glenn  v.  Farmers'  Bank,  235. 
Glicksman  v.  Earley,  374. 
Glidden  v.   Chamberliu,   165. 
Gloucester  Bank  v.  Worcester,  307. 
Goddard  v.  Merchants'  Bank,  148,  158, 

257,  331. 
Godfrey  v.  Craycraft,  172. 
Goggerly  v.  Cuthbert,  314. 
Goldman  v.  Davis,  401. 
Gompertz  v.  Bartlett,   174, 
Good   V.   Martin,   142. 
Goodall  V.   Dolly,  341. 
Goodell  V.  Harrington,  232. 
Gooding  v.  Morgan,  21. 

V.  Underwood,  85. 
Goodloe  V.  Taylor,  36. 
Goodman  v.  Eastman,  25L 

V.  Harvey,  320. 

V.  Simonds,  320,  321. 
Goodnow  V.  Warren,  383. 
Goodrich  v.  Gordon,  97. 

V.  Reynolds,  224. 
Goodsell  V.  Myers,  219. 
Goodwin  v.  Conklin,  314. 

V.  Goodwin,  51. 

V.  Robarts,  2,  15,  17. 
Goodyear  v.  Watson,  305,  308. 
Gordon  v.  Anderson,  59. 

V.  Price,  20. 

V.  Wansey,  295. 
Gore  V.  Gibson,  232.  233. 
Gorham  v.  Keyes,  289. 
Gorman  v.  Ketchum,  108. 
Goshen  Nat.   Bank  v.   Bingham,  ld8, 

203. 
Goshen  &  M.  Turnpike  Road  v.  Hur- 

tin,  42. 
Gould  V.  Armstrong,  285. 

V.  Mortimer,   112. 

V.  Segee,  2(i8. 
Goupy  V.  Harden,  365. 
Gowan   v.   .Jackson,   397. 
Gower  v.  Moore,  364.  400. 
Grade  v.  Sand  ford,  366. 
Graff  V.  Logue,  71. 
Grafton  Bank  v.  Cox,  .I.^S. 
Graliain   v.   Maguirr.    1(55. 

V.   Sangstou,   ',\H\. 
Graudiu  v.  Le  Roy,  182. 


504 


CASES  CITED. 
[The  figures  refer  to  pages.] 


Grange  v.  Reigh,  415. 
Graut  V.  Da  Costa.  74. 

V.  Ellicott,   150,   179.  211, 

V.  Healey,  47,  173. 

V.  Huut.  98. 

V.  Sliaw.  81. 

V.  Vaugbau.  3.  GO,  111,   197,  205, 

2(;kj. 

V.  Wood.    35. 
Graves  v.  American  Exch.  Bank,  117, 
255.  257. 

V.  Johnson,  293. 
Gray  v.  Bank  of  Kentucky,  181,  333. 

V.  Bowden.  29.  59. 

V.  Hook.  289. 

V.  Johnston,    427. 

V.  Miluer,  .58,  87. 

V.  Wood.  72,  214. 

V.  Worden,  43. 
Greathead  v.  Walton,  287. 
Greele  v.  Parker,  9G. 
Green  v.  Cummins,  309. 

V.  Goings,   .S30. 

V.  Hohvay.   245. 

V.  Skeel,  06,  67, 

V.  Wilkie,  265. 
Greenawalt  v.  McDowell,  308. 
Greenfield  Bank  v.  Crafts,  247. 

V.  Stowell,  246.  2.54,  258. 
Greening  v.  Patten.  300. 
Greenough  v.  Smead.  113. 
Greenwell  v.  Haydon,  210. 
Gregg  V.  Beane.  415. 
Greusel  v.  Hubbard,  135. 
Greve  v.  Schweitzer,  297. 
Grey  v.  Cooper.  19.5.  220. 
Gridley  v.  Bane,  2(>4. 

V.  Capen,   110. 
Griener  v.  Ulerey,  226. 
Grlerson  v.  Mason,  71, 
Griffin  v.  Goff.  76. 

V.  Ranney.  245. 

V.  Weatherby.  37. 
Griffith  V.  Reed,  178. 

V.  Wells.  235. 
Griggs  V.  Howe,  258. 
Grimes  v.   Hillenbrand.  235,  285. 

V.  Piersol,  213. 
Grimshaw  v.  Bender,  24. 
Grinman  v.  Walker,  .385,  387. 
Grinnell  v.  Baxter,  16. 
Grist  V.  Backhouse,  66. 
Griswold  v.  Davis.  70. 
Grocers'   Bank   v.    Penfield,    182,   264, 
315. 


Grosvenor  v.  Stone,  398. 
Groth   v.   Gyger.   364. 
G rover  v.  (J rover,  278. 
Groves  v.  Sentell,  5(5. 
Grugeon  v.  Smith,  377. 
Grutacap  v.  Woullnise,  53. 
Guernsey  v.  Burns,  213. 

V.  Rexford,  239. 
Gullck  V.  Ward,  289. 
Gumz  V.  Giegling,  142. 
Gunnis  v.  Weigey,  305. 
Gushee  v.  Eddy,  45. 
Gwinnell  v.  Herbert,  129,  143. 


H 


Haine's  Adm'rs  v.  Tarrant,  220. 

Hale  v.  Rice,  302. 

Haley  v.  Congdon,  208. 

Halifax  v.  Lyle.  149. 

Halifax  Union  v.  Wheelwright,  254. 

Hall  V.  Auburn  Turnpike  Co.,  226. 

V.  Cordell.  184. 

V.  Earnest,  241. 

V.  Farmer,    2. 

V.  Fuller,  251. 

V.  Haggart,  238. 

V.  Newcomb,  141. 

V.  Steel,    94. 

V.  Toby,  40.  109. 

V.  Wilson,  241,  268. 
Halliday  v.  McDougall,  24,  370. 
Halloran  v.  Whitcomb,  10. 
Halstead  v.  Skelton,  359. 
Haly  V.  Lane,  165. 
Hamer  v.  Sidway.  277. 
Hamilton   v.   Le  Grange,   239. 

V.  Lumber  Co.,  415. 

V.  Newcastle  &  D.   R.  R.,  224. 

v.  Spottiswoode,   28. 
Hammett  v.   Barnard,  281. 
Hammond  v.  Dufrene.  396w 
Hanauer  v.  Doane,  293. 
Hance  v.  Miller.  113. 
Hankey  v.  Trotman.  .348. 
Hannahs  y.  Sheldon.  231. 
Hannum  v.  Kicliardsou,  120,  164,  168, 

287. 
Hansard  v.  Robinson,  .338,  339. 
Hansberger  v.  Geiger,  307. 
Harbert  v.  Dumont,  307. 
Harbord  v.  Cooper.  1.33. 
Hardy  v.  Merri weather,  224. 

V.  Waters,  134. 


CASES   CITED. 
[The  figures  refer  to  pages.] 


505 


Hare  v.  Henty,  415. 
Harger  v.  Wilson,  317. 

V.  Wonall,    150,    182,    333,    334. 
Harker   v.   Audeisou,  3:i9,  406,  416. 
Harmer  v.  Steele,  2\)6. 
Harp  V.  Keuuer,  400. 
Harrell  v.  Broxton.  209. 
Harrington  v.  Lee,  280. 
Harris  v.  Berger,  268. 

V.  Brlsco,  289. 

v..  Clark.  278. 

V.  Packer.  335. 
Harrisburg    Trust    Co.    T.    Shufeldt, 

366. 
Harrison  v.  Bank,  406. 

V.  McClelland,    65. 

V.  Kuscoe,  375,  381. 
Harrod  v.  M^-ers,  219. 
Harrop  v.  Fisher,  118,  134. 
Hart  V.  Smith,  75,  344. 
Hartford  Bank  v.  Barry,  76,  362. 

V.  Stedman,  362,  385,  387,  391. 
Hartley  v.  Case,  378. 

V.  Wilkinson.  34,   123,  253. 
Hartwell  v.  McBetb,  214. 
Harvey  v.  Arcbibold,  185. 

V.  Bank,  415. 

V.  Cane,   57,   81. 

V.  Martin.   94,   95. 

V.  Smith,  253. 

V.  Towers,  284,  334, 
Harwood   v.  Jones,  13. 
Hasbrook  v.  Palmer,  48. 
Hascall  v.  Life  Ass'n,  87. 

V.  Whitmore,   180,  327. 
Hasey    v.    White    Pigeon    Beet-Sugar 

Co.,  16. 
Haskell  v.  Boardman,  397. 

V.  .Mitchell,   203. 

V.  Whitmore,   210. 
Haskett  v.  Flint.  81. 
Hastings  v.   Dollarhide,  220. 

V.  Thompson,  53. 
Hatch  V.  Searles,  259. 

V.  Trayes,  74. 
Hatoly  V.   Pike,  139. 
Hawkins  v.  Bone,  232. 

V.  Cardy,  131. 

V.  Watkins,  43. 
Hawley  v.  Sloo,  ISO. 
Haxtnn   v.   Bishop,   213. 
Haydon  v.  Wddon,  i:{2. 
Hayes  v.  Caiilficld.  264. 
Hayling  v.   .Miillliall.  298. 
Haynes  v.  Kudd,  289. 


Hays  V.  Hathorn,  214,  215. 

V.  Kingston,  209. 
Hayword  v.  Stearns,  210. 
Heard   v.   Dubuque   Co.   Bank,   50. 
Heartt  v.  Rhodes,  413,  415. 
Heath,  Ex  parte,  395. 

V.  Blake,  248. 

V.  Van   Cott,    139. 
Hebden  v.  Hartsiuk,  366. 
Hedger  v.  Steaveuson,  377. 
Hedges  v.  Sealy,  134,  201,  203. 
Heenan   v.   Nash,   86. 
Hegeler   v.   Comstock,   53. 
Hegeman   v.   Moon,   29. 
Heidelback.  Ex  parte,  189. 
Heiser  v.  Hatch,  257. 
Heman  v.  Francisco,  59. 
Henderson  v.  Henderson,  302. 

V.  Palmer,  289. 
Hendricks  v.  Franklin,  189. 

V.  Judah,  330. 

V.  Thoruton,   60. 
Henry  v.  Con  ley,  20. 

V.  Jones,  76. 

V.  Lee,  351. 
Henry    Christian    Building    &    Loan 

Ass'n  V.  Walton,  256. 
Henshaw  v.  Root,  413. 
Herdic  v.  Roessler,  184. 
Hereth  v.  Meyer,  49. 
Herrick  v.   Baldwin,  400. 

V.  Bennett,   41. 

V.  Carman,  140. 

V.  W'hitney.  168. 

V.  Woolverton,  345. 
Herring  v.  Woodhull,  108. 
Heuertematte  v.  Morris,  149,  150,  283. 
Heylyn  v.  Adamson,  1.58,  342. 
Heywood  v.  Pickering,  415. 
Hi  hernia  Nat.  Bank  v.  Lacombe,  162. 
Hickerson  v.  Raiguel,  314. 
Hickman  v.  Ryan,  391. 
Hicks  V.  Mars'hall,  232. 
Hidden  v.  Bishop,  181. 
Higgins  V.  Bullock,  137. 
Highmore  v.   Primrose,  74. 
Hill  V.  Anderson,  219. 

V.  Bostick,  308. 

V.  Coolcy,  2.".0. 

V.   Lewis.  4.   16,  106. 

V.  North rup,  2:?.">,  285, 

V.  Wilson.    273. 
Hills  V.  Place,  3.-.9,  36l5,  .367. 
Hillsdale  College  v.  Thomas,  08. 
Hilton  V.  Houghton.  287. 


506 


CASES  CITED. 
[The  flguree  refer  to  pagea.] 


Hilton  V.  Shepherd,  382. 

V.  Siliitb,    182. 
Hinckley  v.  Railroad  Co.,  210.  339. 
Hiue  V.  Alh'ly.  ICl.  354. 
Hirsch  v.  Trainer,  231. 
Hirschfeld   v.   Smith,  403. 
Hirshtield  v.  Ft.  Worth  Nat.  Bank,  77. 
Hitchcock  V.  Buchanan.  67. 

V.  Galveston,  224. 
Hoare  v.  Cazeuove,  153,  156w 
Hobbs  V.   Straiue.  385. 
Hobson  V.  Stevenson,  11, 
Hodge  V.  Fillis,  353. 
Hodges  V.  Adams,  117. 

V.  Holland,  214. 

V.  Hunt,  219. 

V.  Nash.  177. 

V.  Shuler,  49.  375,  376. 

V.  Steward,   17(1,   197,  202. 
Hodgkins  v.  Moulton,  194. 
Hoffman  v.   Bank,  145.  147,  148,  283. 

V.  Foster.   180,  212. 
Hogan  V.  Moore,  270. 
Hogarth   v.   Latham,   183. 
Hoge  V.  Lansing.  320. 
Hogue   V.    Williamson,   46w 
Holbrook  v.   Payne,  94. 

V.  Vibbard,   129. 
Holcomb  V.  Wyckoff,  317. 
Holden   v.   Rattan   Co..  333. 

V.  Trust  Co.,  172. 
Holdsworth  v.  Hunter,  25. 
Holeman  v.  Hobson,  241. 
Holliday  v.  Atkinson,  193.  278. 
Hollingsworth  v.  Moulton,  215. 
HoUoway  v.  Quinn,  135. 
Holman  v.  Creagmiles,  281, 

V.  Johnson,  294. 
Holmes  v.  Bank,  242. 

V.  Jaques.  01. 

V.  Kerrison.  344. 

V.  Kidd,  209. 

V.  Roe,  415. 

V.  Trumper,   252. 
Holt  V.  Ross,  117,  151,  152. 
Holton  V.  McCormick,  115. 
Holtz  V.  Boppe.  357. 
Home  Ins.  Co.  v.  Green,  375. 
Homes  v.   Smyth,  312. 
Hook  V.  Pratt,  125,  126,  136. 
Hooper  v.  Williams,  61. 
Hoover  v.  McCormick,  402. 
Hopkins  v.  Detwiler,  20. 
Hopkinson  v.  Forster,  408,  419. 
Hopkirk  v.  Page,  396. 


Hopper,  In  re,  229. 
llopps  V.  Savage,  57,  88. 
Horn  V.  Newton  City  Bank,  246. 
Home  V.  Rouquette,  403. 
Horton  v.  Coggs,  3. 
Hortsman  v.  Henshaw,  149,  151,  256. 
Hosstatter  v.  Wilson,  50. 
Hough  V.  Loring,  94. 
'  Housatonic  Bank  v.  Laflin,  374. 
House  V.  Adams,  341. 

V.  Bank,  384. 
Housego  V.  Cowne,  373,  383,  385. 
Houston  V.  Bruner,  142. 
Hovey  v.  Chase,  2.30. 

V.  Hobson,  227,  228. 

V.  Sebring,  213. 
Howard  v.  Ames,  207. 

V.  Duncan,  256. 

V.  Ives,  380,  392,  393. 

V.  Simpkius,  219. 
Howard   Banking   Co.   v.   Welcbman, 

326. 
Howell  V.  Medler,  13. 
Howe  Mach.  Co.  v.  Hadden,  298. 
Howes  V.  Austin,  329,  413. 
Hoxie  V.  Kennedy,  215. 
Hoyt  V.  Lynch,  28. 

V.  Seeley,  413. 
Hubbard  v.  Bank,  184. 

V.  Matthews,  383. 

V.  Moseley,  51. 

V.  Rankin,  2G5. 
Hubbell  V.  Flint,  293. 
Huff  V.  Wagner,  BIG.  317, 
Hughes  V.  .Tones,  229. 

V.  Kiddell,  131. 

V.  Nelson,  203. 
Huguenim  v.  Baseley,  269. 
Hull  V.  Myers,  183,  397. 
Humphreys  v.  Guillow,  247, 
Hunt  V.  Adams,  llu. 

V.  Gray,  247,  248,  255. 

V.  Massey,  219. 

V.  Standart,  187. 
Hunter  v.  Jeffery,  62. 

V.  Wooti,  172. 
Huntington  v.  Ballou,  247, 

V.  Bank,  259. 
Husband  v.  Epling,  35. 
Huse  V.  Hamblin,  44. 
Hussey  v.  Winslow,  30. 
Huston  V.  Young,  205. 
Hutchins  v.  Hebbard,  71. 

V.   McCann.  172. 
Hyde  v.  Goodnow,  184,  186. 


CASES  CITED. 
[The  figures  refer  to  pages.] 


607 


Hyde  y.  Paige,  66. 
Hyne  v.  Dewdney,  29. 


I 


nsley  V.  Jones,  80,  174. 
Imperial  Land  Co.,  In  re,  25. 
Imperial  Loan  Co.  v.  Stone,  228. 
Importers'   &   Traders'   Nat   Bank   v. 
Littell.  175. 

V.  Sbaw,  389. 
Ingalls  V.  Lee,  106,  164,  172,  244. 
Ingersoll  v.  Long,  187. 
Ingham  v.  Primrose,  303. 

y.  Vaden,  314. 
Ingrai.^  y.  Forster,  103. 
Iowa  College  y.  Hill,  324. 
Ireland  y.  Kip,  386,  387. 
Irish  y.  Cutter,  132. 
Iron  City  Nat.  Bank  y.  McCord,  32. 
Iryine  v.  Lowry,  43. 
Irving  Nat.  Bank  v.  Alley,  6S. 
Iselin  y.  Rowlands,  215, 
Isnard  y.  Jones,  253. 
Israel  y.  Gale,  179. 
Ives  y.  Bank.  2.^8. 
Ivory  V.  Michael,  252» 


J 


Jackson  v.  First  Nat.  Bauk,  182. 

V,  Haskell.  114. 

y.  Henry,  240. 

y.  Hudson,  86. 

V.  Johnson.  247. 

V.  King,  230. 

T.  Myers,  25. 

V.  Paol<er.  36a 

V.  Pipott.  83. 

y.  Ricliards.  .390. 

y.  Travis.  242. 

y.  Vv'arwick.  178. 
Jacobs  y.  Hart.  249. 
Jacobs    Pharmacy   Co.    v.   Trust   Co., 

18;{. 
Jaoqnlm  y.  Warren.  30. 
Jaffray  y.  Brown.  141.  , 
Jagger  v.  Bank.  373.  381. 
James  v.  Clia liners.  206,  329,  331. 

y.  Wade.  398. 
Jameson  v.  Swinton.  382,  390. 
Janson  v.  Thomas,  345. 
Jarvis  V.  Mfg.  Co..  392. 


Jarvis  y.  Wilkins,  34,  38. 

V.  Wilson,  80.  149. 
Jefferies  v.  Austin,  192,  28L 
Jefifries  y.  Lamb.  2SJ. 
Jenkins  y.  Jenkins,  219. 

y.  Tongue,  213. 
Jenners  y.  Howard,  232. 
Jenney  y,  Herle,  37. 
Jennings  y.  Roberts.  381. 
Jennison  v.  Parker,  369. 

y.  Stafiford,  74. 
Jenys  y.  Fawler,  194. 
Jerome  y.  Bigelow,  288. 

y.  Whitney,  45. 
Jeune  y.  Ward,  94. 
Jewett  y.  Cook,  12. 
John  V.  City  Nat.  Bank,  387. 
Johnson  v.  Bank  of  Fulton,  173. 

y.  Brown,  388. 

y.  Collings,  92,  96,  100,  101. 

y.  Frisbie,  53. 

V.  Haight,  352,  367. 

y.  Heagan,  253. 

y.  Mangum,  202. 

y.  Medlicott,  233. 

y.  Mitchell.  114,  118. 

y.  Stone,  231. 

y.  Titus,  280. 

V.  Way,  111,  318,  321. 
Johnston  Harvester  Co.  y.  Clark,  51, 

52. 
Jones  y.  Bank,  97. 

V.  Berryhill,  179. 

y.  Broadhurst,  298. 

y.  Carter,  11. 

y.  Deyer,  278. 

V.  Fales,  43. 

y.  Fort,  314. 

V.  Gordon,  334. 

y.  Lees,  291. 

V.  Lewis,  386. 

y.  Radatz,  51. 

y.  Savage,  365,  36a 

y.  Shaw,  71. 

y.  Shawhan,  20. 

y.  Simpson,  .''>2. 
Jordan  v.  Tate,  36. 

v.  Wheeler,  343. 
Joseph  v.  Bigelow.  329. 
Joslyn  y.  Eastman.  305. 
Josselyn  y.  Ames,  114. 

V.  Lacier,  7,  38,  75. 
Jtidah  y.  Harris,  44. 
•Fiidd   V.   Scaver,   172. 
Judsun  V.  Corconiii.  It. 


508 


CASES   CITED. 
[The  figures  refer  to  pages.] 


Judson  V.  Gookwln.  16,  110. 
Juiliiurd  v.   Challt't'.   71. 
Juniata  Bank  v.  Hale,  3G4,  373.  399. 
Jury  V.  Barker,  38. 

Justh  V.  National  Bank  of  Common- 
wealth, 2G4. 


K 


Kamm  v.  Holland,  141. 
Kasson  v.  Smith,  181. 
Kearney  v.  King,  24. 
Kearslake  v.  Morgan,  366. 
Keene  v.  Beard,  4U8-410,  419. 

V,  Weeks,  248. 
Keith  V,  Jones,  44. 
Kelley  v.  Hemmiugway,  34. 
Kellogg  V.  Curtis,  334. 

V.  Fancher,  315. 

V.  Schaake.  210. 
Kelly  V.  Burroughs,  135,  177. 

V.  Solari,  lUU. 
Kendall  v.  Robertson,  235. 
Kennedy  v.  Crandell,  2o5. 

V.  Geddes,  100.  392. 

V.  Goodman,  192. 
Kent  V.  Walton,  239. 
Kenworthy  v.  Sawyer,  165. 
Ketch um  v.  Barber,  237,  239. 
Keteltas  v.  Myers,  70,  136. 
Key  V.  Flint,  181. 
Keyes  v.  Fenstermaker,  345. 
Kidder  v.  Horribin,  329. 
KieEfer  v.  Ehler,  318. 
Kilgore  v.  Dempsey,  185. 
Kilpatrlck  v.  Heaton,  109. 
Kimball  v.  Huntington,  1,  6,  29,  74. 
King  V.  Bickley,  379. 

V.  Box,  61. 

V.  Crowell,  339,  352. 

V.  Ellor,  28. 

V.  Fleming,  287. 

V.  Hurley,  376. 
Kingsbury  v.  Wall,  51. 
Kings  Co.  El.  R.  Co.,  In  re,  226. 
King's  Estate,  In  re,  194. 
Kingsland  v.  Koeppe,  107,  142. 
Kingston  v.  Long,  34. 
Kingston  Bank  v.  Eltinge,  257. 
Kinne  v.  F'ord,  69. 

V.  Johnson,  269. 
Kinsley  v.  Robinson.  394. 
Kinyon  v.  Stanton,  413. 

V.  Wohlford,    208. 


Kinzie  v.  Farmers'  &  Mechanics'  BaJik, 

(«. 
Kirk  V.  Dodge  Co.  M.  Ins.  Co.,  50. 
Kirkman  v.  Bank  of  America,  69. 
Kirkpatrick  v.  Puryear,  413. 
Kiskadden  v.  Alien,  36. 
Kitohel  V.  Schenck,  178,  2.3S. 
Kitchen  v.  Loudenbaok,  317. 

V.  Place,  2(;S. 
Kleeman  v.  Frisbie,  197. 
Klein  v.  Keyes,  193. 
Kling  V.  Kelioe.  11.5. 
Knigbt  V.  Hunt,  178. 

V.  Jones,  61. 
Knights  V.  Putnam,  240,  242,  243. 
Kuisely  v.  Sampson,  72. 
Knox  V.  Clifford,  287. 
Kuoxville  Nat.  Bank  v.  Clark,  254. 
Koch  V.  Howell.  94. 
Kohler  v.  Montgomery,  352. 
Kohn  V.  Egg  Co.,  143. 
Konig  V.  Bayard,  102. 
Kreiss  v.  Seligman.  294. 
Kulii  V.  Press  Co..  23.5. 
Knlenkamp  v.  Groff,  194. 
Kuutz  V.  Temple,  77,  3.50. 
Kyle  V.  Thompson,  136. 
Kyne  v.  Erskine,  300. 


Labouchere  v.  Tupper,  G5. 

Laclede  Bank  v.  Sohuler.  -121. 

La  Coste  v.  De  Armas.  213. 

La  Due  v.  Bank,  345. 

T>a Fayette  Ins.  Co.  v.  Rogers,  138. 

Laflin  v.  Sherman,  213. 

Laing  v.  Stone,  172. 

Laird  v.  State,  44. 

Lake  Shore  Nat.  Bank  v.  Colliery  Co., 

383. 
Lambert,  Ex  parte.  154,  301. 

V.  Ghisolin,  399. 
L'Amoureaux  v.  Crosby.  229.  230. 
Lancaster  v.  Baltzell,  255. 
Lancaster  Bank  v.  Woodward.  417. 
Lancaster  Co.  Bank  v.  Mdore.  229. 
Lancaster  Nat.  Bank  v.  Tayloi,  203. 
Lancey  v.  Clark,  178,  300. 
Lane  v.  Krekle.  62. 

V.  Smith,  197. 

V.  Stewart,  401. 
Langenberger  V.  Kroeger,  362. 


CASES  CITED. 
[The  figures  refer  to  pages.] 


509 


Langston  v.  Corney,  93. 

Langtoa  v.  Lazarus,  249. 

Laok  V.  Morrison,  142. 

Larkin  v.  Hardenbrook,  302. 

La  Rose  v.  Logansport  Nat.  Bank,  110. 

Larsen  v.  Breene,  423. 

Latham  v.  Smith,  245. 

La  Touche  v.  La  Touche,  272. 

Law  V.  Parnell,  213. 

Lawrence  v.  American  Nat.  Bank,  257. 

V.  Bassett.  188. 

V.  Clark,  314. 

V.  Dougherty,  45. 

V.  Miller,  379. 

V.  Willis,  230. 
Lawson  v.  Farmers'  Bank,  166,  392. 

V.  Lovejoy,  219. 

V.  Weston,  321. 
Laxton  v.  Peat,  306. 
Lay  V.  Wissmaa,  317,  326. 
Lazarus  v.  Cowie,  183,  296. 
Lazier  v.  Horan,  359,  366. 
Leach  v.  Hewitt,  395. 
Leather  Cloth  Co.  v.  Lorsont,  291. 
Leavitt  v.  Putnam,  117,  127,  129,  201, 
207,  209. 

V.  Simes,  352. 
Lebel  v.  Tucker,  188. 
Lecaan  v.  Kiikraan,  143. 
Ledwich  v.  McKim,  260. 
Lee  V.  Balcom,  30. 

V.  Green,  20. 

V.  Murdoch,  250. 

V.  Selleck,  40.3. 

T.  Starbird.  251. 

V.  Swift,  6. 

V.  Wilcocks,  47,  173. 
Leeds  v.  Lancashire,  123,  253. 
Leftley  v.  Mills,  301. 
Legge  V.  Thorpe.  390. 
Leggett  V.  Cooper,  280. 

V.  Jones.  53. 
Legro  V.  Staples,  52. 
Lehman  v.  Jones,  357,  399. 
Leiber  v.  Goodrich,  43. 
Leland  v.  Farnham,  3.30. 
Le  Neve  v.  Le  Neve,  217,  .318. 
Lenheim  v.  Fay,  112. 
Lcnnig  V.  Ralston,  24,  188,  189,  333. 
Lenuon  v.  Grauer.  Kwk 
Lenox  v.  I^everett,  153. 
V.  Roberts,  76,  3f)0. 
Leonard  v.  Gary.  402. 
V,  Mason,  49. 


Leonard  v.  Olson,  346. 

V.  Vredenburg,  110. 
Leslie  v.  Hastings,  88,  90. 

V.  Lorillard,  291. 
Lester  v.  CJiven,  409,  415,  417,  418. 
Lett  V.  Morris,  8. 
Levy  V.  Gadsby,  243. 
Lewis  V.  Berry,  39. 

V.  Clay,  266,  431. 

V.  Cosgrave,  280. 

V.  Davisson,  20. 

V.  Gompertz,  376. 

V.  Hathman,  134. 

V.  Hodgdon,  214. 

V.  Kramer,  250. 

V.  Lady  Parker,  330. 

V.  Payn,  247. 

y.  Pead,  230. 
Libby  v.  Mikelborg,  41. 
Lightbody  v.  Bank,  279. 
Lincoln  v.  Buckmaster,  231, 

V.  Stevens,  178. 
Lindell  v.  Rokes,  278. 
Lindenberger  v.  Beall.  390. 
Linderman  v.  Guldin,  383. 
Lindley  v.  Hofraan,  265. 
Lindsay  v.  Price,  113. 
Lindsey  v.  McClelland,  345. 
Lindus  v.  Brad  well,  81. 
Lisle  v.  Rogers,  2.")0. 
Lithgow  V.  Lyon,  172. 
Littauer  v.  Goldman,  168,  169. 
Lit  tell  V.  Hord,  175. 
Little  V.  O'Brien.  213. 

V.  Phonix  Bank,  408,  411,  413. 

V.  Slackford.  27. 
Littlefield  v.  Bank.  197. 
Livingston  v.  Ilastie,  175. 
Lloyd  V.  Sigouruey.  125,  126,  322. 
Lobdell  V.  Raker.  168. 
Lockwood  V.  Crawford,  376. 
Lodge  V.  Phelps,  197. 
V.  Spooner,    173. 
Logan  V.  Attix,  20. 
lyomax  V.  Picot,  120. 
London  &  C.  Bank  v.  Groome.  417. 
London  &  S.  Bank  v.  Wentworth,  81. 
Long  V.   Moore,  250. 
Loonils  V.  Pulver,  34.'). 

V.  RiKk,  269. 
I>ord  V.  Bank.  182. 
Loring  V.  Cliasc,  215. 
Losee  v.  Dunk  In.  2(t!).  317. 
LouisJjina  Stale  Bank  v.  Rowel,  385. 


510 


CASES   CITED. 
(The  figures  reler  to  pages.] 


lx)iiisville  Bauklnp  Co.  v.  Gray,  50. 
Louisville.  E.  &  St.  L,  U.  Co.  v.  Cald- 
well. 7. 
Ix)vt'joy  V.  Whipple,  287. 
Lovell  V.  Evertson.  213. 

y.  Hill.  38. 
I^vett  V.  Cornwell.  417. 
Lowe  V.  Bliss,  53. 

V.  Waller.  105.  242.  243w 
Lowery  v.  Steward,  8. 
Lowes  V.  Mazzaredo,  243. 
Ix)wi-y  V.  Steele,  401. 
Lowy  V.  Andreas,  16. 
Loyd  V.  iMcCaffrey,  419. 
Lubbering  v.  Kohlbrecber,  247. 
Lucas  V.  James,  55. 

V.  Ivadew,  342. 

V.  Pitney,  224. 
Luce  V.  ShoCf,  76. 
Luckey  v.  Pepper,  344. 
Luff  V.  Pope,  27. 
Lugrue  v.  Woodruff,  981 
Lumley  v.  Palmer,  92. 
Lunt  V.  Adams,  351. 
Luxe  V.  Pompe.  171. 
Lynn  v.  Bell,  408. 
Lyon  V.  ^Larshall,  60. 

V.  Mitchell,  289. 
I-yon,  Potter  &  Co.  v.  Bank,  142,  203, 

204. 
Lyons  v.  Divelbis,  109. 
Lysaght  v.  Bryant,  382. 


M 

Macarthur  v.  Fullarton,  35. 

McCaffrey  v.  Dustin,  207. 

McCall  V.  Taylor,  50. 

McCamant  v.  Miners'  Trust  Co.  Bank, 

128. 
McCaskill  v.  Connecticut  Say.  Bank, 

27. 
McClaln  v.  Davis,  231. 

V.  Weidemeyer,  196. 
McClanev.  Fitch,  403. 
McCrillls  V.  How,  218. 
McCulloch  V.  Hoffman,  193. 
McCune  v.  Belt,  374. 
McDoal  V.  Yeomans.  132. 
McDonald  v.  Hodge.  45. 

V.  Muscatine  Xat.  Bank,  268. 
McDowell  V.  Cook.  301. 
McEvers  v.  Mason,  96. 
McGehee  y.  Posey,  45. 


McGinn  v.  Holmes,  20. 

McGiunis  v.  Com.,  2'J9. 

McGrade  v.  German  Sav.  Inst.,  418. 

McGrath  v.  Clark,  251,  254. 

McG ruder    v.    Bank    of    Washington, 
358.  399.  400. 

McGulre  v.  Bidwell,  20, 

Mclntire  v.  Preston.  224. 

Macintosh  v.  Haydon.  250. 
V.  Lytle.  59. 

McKay's  Estate  v.  Bank,  185. 

McKenzie  v.  British  Linen  Co.,  256. 

Mackey  v.  Peterson.  205. 

McKiunell  v.  Robinson.  293. 

Mackintosh  v.  Eliot  Nat.  Bank,  147. 

McKleroy  v.  Southern  Bank  of  Ken- 
tucky. 147. 

McKnight  v.  Knisely.  312.  315. 
V.  Wheeler,  104. 

McKyring  v.  Bull.  330. 

McLaren  v.  Hall,  20. 

McLaughlin,  In  re,  228. 
V.  McGovern.  105. 

McLean   v.   Clydesdale   Banking  Co., 
408,  428. 

Macleed  v.  Snee,  39.  40. 

McLemore  v.  Powell.  307. 

McLeod  V.  Hunter.  41. 

McMinn  v.  Richmonds.  218. 

McMullen  v.  Rafferty.  8.  14. 

McMurchy  v,  Robinson.  76. 

McNamee  v.  McNamee.  286. 

McXeilage  v.  Holloway,  221. 

Macomb  v.  Wilkinson.  194. 

Macomber  v.  Dunham.   172. 

McSharran  v.  Neeley.  72. 

McWilliam  v.  Webb.  10. 

Madison  Square  Bank  v.  Pierce,  298. 

Magee  v.  Badger,  320.  321. 

Magruder   v.    Union    Bank,    355,   364, 
307,  400. 

Maine  Trust  &  Banking  Co.  v.  Butler, 
109. 

Maitland  v.  Citizens'  Nat.  Bank,  316. 

Mammon  v.  Hartman.  141. 

Manchester  Bank  v.  Fellows,  385. 

Mandeville  v.  Newton,  124,  1(J8. 
V.  Riddle,  3. 
V.  Welch,  8,  79. 

Mangles  v.  Dixon,  197. 

Mann  v.  Moors,  389. 

Manners,  Ex  parte.  245. 

Manning  v.  Kohn.  173. 
V.  McClure.  312. 

Manrow  v.  Durham,  110. 


CASES  CITED. 
[The  figures  refer  to  pages.] 


Oil 


Manwaring  v.  Harrison,  348. 

Marine   Kat.   Banli   v.   National   City 

Bank,  251,  257,  421. 
Marion  &  M.  K.  R.  v.  Hodge,  145. 
Market  &  Fulton  Nat.  Bank  v.  Sar- 
gent, 258. 
Markey  v.  Corey,  109. 
Marr  v.  Johnson,  382. 
Marsh  v,  Marshall,  210. 
Marshall  v.  Baltimore  &  O.  R.  Co.,  289. 

V.  Clary,  85. 

V.  Marshall,  209. 

V.  Rockwood,  70,  136. 
Marston  v.  Allen,  136,  137. 
Martendale  v.  I'^ollett,  252,  255, 
Martin  v.  Chauntry,  43. 

V.  Franklin,  173, 

V.  Mayo,  219. 

v.  Winslow,  345. 
Marvin  v.  McCullum,  68. 
Marvine  v.  Hymers,  224. 
Marzetti  v.  Williams,  427,  428. 
Mason  v.  Dousay,  92,  98,  184,  425 

V.  Franklin,  161,  342,  353. 

V.  Lord,  241. 

▼.  Mason,  176. 

V.  Morgan,  202. 

V.  Noonan,  330. 
Maspero  v.  PeJesclaux,  383. 
Massachusetts  Bank  v.  Olive/,  383. 
Massey  v.  Paola  Bldg.  &  Sav.  Ass'n, 

226. 
Master  v.  Miller,  246,  249. 
Master3  v.  lhl)erson,  327. 
Mateme  v.  Horwitz,  288. 
Mathews  v.  Aikin,  306. 
Matteson  v.  Ellsworth,  248,  255. 

V.  Moulton.  95. 
Matthews  v.  Rlo.xscme,  130. 

V.  Haydon,  3(3. 

v.  Houghton,  45. 
Matth  lessen  v.  McMahon,  228. 
Mattison  v.  Marl<s.  31,  36. 
Maule  V.  Crawford.  6,  16. 
Mauran  v.  Lamb.  200,  214.  299. 
Maux  Ferry  Gravel  Road  Co.  v.  Bran- 
egan, 397. 
Maxwell  v.  Vansant,  113. 
May  V.  CamplM'il,  242. 

V.  Chapninn,  319,  327. 

V.  Coflin.   i;50. 

V.  Hewitt.  r,7. 

V.  Kelly.    87. 

V.  Miller.  56. 


Mayberry  v.  Morris,  315. 
Mayer  v.  Heidelbach,  314. 
Meacher  v.  Fort,  164,  256b 
Mead  v.  Engs,  382,  391. 

V.  Keeler,  224. 

V.  Small,  402. 

V.  Young,  117,  255. 
Meadow  v.  Bird,  312. 
Meads  v.  Merchants'  Bank,  421,  422. 
Mechanics'  Bank  v.  Merchants'  Bank, 
75,  354. 

V.  Straiton,  16.  59,  62.  330. 
Mechanics'    Banking    Ass'n    v.    New 

York  &  S.  W.  L.  Co.,  225. 
Mechanics'  &  F.  Bank  v.  VVixson,  315. 
Mechanics'  &  Traders'  Bank  v.  Bar- 

nett,  316. 
Mechanics'    &    Traders'    Ins.    Co.    v. 

Coons,  416. 
Mechanics'  &  Traders'  Nat  Bank  v. 

Crow,  333. 
Meeker  v.  Shanks,  68. 
Megginson  v.  Harper,  60. 
Mehlberg  v.  Tisher,  275. 
Mellersh  v.  Rippen,  375. 
Mellish  v.  Rawdon,  343,  365. 

V.  Simeon.  160.  173. 
Meltzer  v.  Doll.  272. 
Mendez  v.  Carreroon,  299. 
Mercantile  Bank  v.  Cox,  100. 
Mercer  v.  Lancaster.  388. 
Mercer  Co.  v.  Hacket.  206. 
Merchants'  Bank  v.  Birch,  383. 

V.   Elderkin.  3."(;. 

V.  Spicer,  55.  302.  413. 

V.  State  Bank.  421. 
Merchants'  Loan  &  Trust  Co.  v.  Clair, 

215. 
Merchants'  Nat.   Rank  v.   Eagle   Nat 
Bank,   147. 

V.  State  Nat  Bank,  408.  409,  415, 
421. 
Merchants'    &    Mechanics'    Bank    v. 

Hcwett.  11. 
Meridian  Nat  Bank  v.  Gallaudet,  16a 
Merrick  v.  Boury,  20. 
Merritt  v.  Benton.  173. 

V.  Cole,  299. 

V.   K:irle.  2X6. 

V.  "^rodd,  346. 

V.   Woodbury.  373.  .384. 
Mersiiiiiu  v.  Wcrges,  216. 
.Mertens  v.  Wilmington.  1.54,  301. 
Messenger  v.  Southey,  374. 


612 


CASES   CITED. 
[The  figures  refer  to  pages.] 


Metcalfe  v.  Ricliardson,  384, 
Metioi)olitan  Nat.  Bauk  of  Chicago  v. 

Jones,  41ili. 
Meyer  v.  Ilibsber.  177,  178,  35G-358. 

V.   lIuiKkt',  2."i5. 

T.  Huneke,  L'4S. 

V,  Richards,   1(;4,   1G9, 
Meyers  v.  IMiillips,  'S3. 
Mlchijian  Bauk  v.  Eldrefl,  2r)8. 
Michigan  Ins.  Bank  v.  Eldred,  1. 
Michigan  lus.  Co.  v.  Leavenworth,  68. 
Miers  v.  Brown,  374.  379. 
Miles  V.  Llugeruian,  219. 
Milford  V.  Mayer,  342. 
Miller  v.  Austen,  31. 

V.  Biddle.  6.  42, 

V.  Crayton,  322. 

V.  Excelsior  Stone  Co.,  5L 

V.  Finley,  234,  321. 

V.  Gilleland,  2r)0. 

V.  Hackley.  161,  371,  38a 

V.  Hull.  243. 

V.  La  rued,  195. 

V.  Neihaus,  92. 

V.  Poage,  36. 

V.  Race.  Ill,  208. 

V.  Talcott,  211,  326. 

V.  Thomson,  145. 

V.  Tiffany,   185. 

V.  Wood,  282. 

V.  Zeimer.  243. 
Minis  V.  Barber,  182,  194. 
Mills  V.   Bank  of  United  States,  374, 
377.  416. 

V,  Mills.  289. 
Milne  V.  Graham,  197. 
Milton's  Case.  3. 
Miner  v.  Paris  Exch.  Bank,  239. 
Minet  v.  Gibson.  62.  330. 
Mining  Co.  v.  Anglo-Californian  Bank, 

224. 
Minor  v.  Bewick.  134. 
Minot  V.  Russ.  409,  42.3,  424. 
Minturn  v.  Fisher,  406. 
Miser  V.  Trovinger,  183,  395. 
Mishler  v.  Reed.  296. 
Mitchel  V.  De  Grand.  341,  352. 
Mitchell  V.  Baring.  3r)7. 

V.  Cross.  391. 

V.  Culver.  72.  2.^8.  259,  268. 

V.  Fuller.  114.  118. 

V.  Reynolds.  290. 

V.  Rome  R.  Co..  226. 
Mix  V.  National  Bank  of  Bloomlngton, 
315. 


Mobile  Bank  v.  Brown,  44. 
Mobley  v.  Clark.  394. 

V.  Ryan.  330. 
Mohawk  Bauk  v.  Corey,  180.  182. 
Moiese  v.  Kuapp.  57. 
Moline,  Ex  parte,  376.  384.  390. 
Moltou  V.  Camroux,  227,  231. 
Muuey  V.   Ricketts.  209. 
Monroe  v.  Hoff.  20. 
Montague  v.  Perkins,  259. 
;Moutelius  V.  Charles,  343. 
Montgomery  v.  Crossthwait,  253. 

V.  Elliott.  359. 

V.  Tutt,  359. 
Montross  v.  Clark.  178,  179. 
Monument  Nat.  Bank  v.  Globe  Works, 

225. 
Moody  V.  Threkeld,  60. 
Moore  v.  Clopton,  184. 

V.  Coffield.  399. 

V.  Cross.  136,  141,  178. 

V.  Ilershey,  227,  229. 

V.  McClure.  66. 

V.  Maple.  213. 

V.  Moore,  324. 

V.  Ryder,  314. 

V.  Waitt.  357. 

V.  AVarren.  348. 
Moorman  v.  State  Bank,  376. 
Moran    v.    Commissioners    of    Miami 

Co.,  206. 
Mordecai  v.  Dawklns,  293. 
More  V.  Manning.  117,  127.  201, 
Morehead  v.  Parkersburg  Nat  Bank, 

250. 
Morford  v.  Davis,  164. 
Morgan  v.  Bank  of  Louisville,  398. 

V.  Fallenstein,  281, 

V.  Reintzel,  298. 

V.  Reinzel.  339. 

V.  United  States,  209.  345. 

V.  Van  Ingen,  371,  3S2. 

V.  Wood  worth.  382. 
Morley  v.  Culverwell.  297,  302. 
Mornyer  v.  Cooper.  327. 
Morris  v.  Husson,  389. 

V.  Lee.  30. 

V.  Poillon,  1S9,  196. 
Morrison  v.  Baile.v,  27.  406. 
Morris  Run  Coal  Co.  v.  Barclay  Coal 

Co.,  290. 
Morrow  v.  Brown,  281. 
Morse  v.  Chamberlin,  388. 

V.  Massachusetts  Nat.  Bank,  409, 
425. 


CASES  CITED. 
[The  figures  refer  to  pages.] 


513 


Morse    Twist   Drill   &    Mach.    Co.    v. 

Morse,  291. 
Morton  v.  Xaylor,  8,  37. 

V.  Steward,  218. 

V.  Thm-ber,  238. 

V.  Westeott,  388. 
Moses  V.  Banlv,  61,  110,  416,  419. 

V.  Ela.  397. 

V.  Trice,  339. 
Mosher  v.  Carpenter,  164. 
Moss  V.  Averell,  224. 

V.  Harpeth  Academy,  224. 

V.  Oakley,  224. 
Mott  V.  Havana  Nat.  Bank,  49. 

V.  Hiclis,  06,  120,  224. 
Moule  V.  Brown,  415. 
Mt.  Mansfield  Hotel  Co.  v.  Bailey,  130. 
Moxon  V.  Pulling,  106. 
Muilman   v.  D'Eguino,   341,  343,  347, 

348. 
Muir  V.  Crawford,  308. 
Mulherrin  v.  Hannnm,  366. 
Muller  V.  Pondir,  203. 
Mullick  V.  Radakissen,  341,  346,  408. 
Munger  v.  Shannon,  7,  37. 
Munn  V.  Baldwin,  388,  389. 

V,  Burch,  418. 

V.  Commission  Co.,  172,  175,  224, 
244. 
Munroe  v.  Easton,  367. 
Murdock  v.  Mills.  97. 
Murphy  v.  Collins,  285. 

V.  Keyes.  194. 

V.  Lippe,  280. 
Murray  v.  Beckwith,  19.5. 

V.  East  India  Co.,  367. 

V.  Judah,  168.  413. 

V,  Lardner,  ,321.  .323. 
Muse  V.  Dantzler.  25. 
Mussolman  v.  Oakes,  60. 
Mn.'?sey  v.  Eagle  Bank.  421.  422. 
MuRSon  V.  I.akp,  129,  338.  368. 
Mustard  v.  Wohlford's  Heirs.  219. 
Mutual  I-ife  Ins.  Co.  v.  Hunt,  231. 
Mutual  Nat  Bank  v.  Kotge,  423,  424. 


N 


Nagle  r.  Homer,  85. 

V.  Lyman.  99. 
Nailor  V.  Bowie,  .339. 
Nance  v.  Lary,  260. 
Nash  V.  Brown,  182. 

V.  Towne,  66. 
NEG.BILLS.-33 


Nason  v.  Barff,  94. 
Nassau  Bank  v.  Jones,  224. 
National  Bank  v.  Green,  172,  244. 
V.  Kirby,  334.  335. 
V.  Law,  322. 
V.  Millard,   419. 
T.  Texas,  208. 
V.  Young.  183. 
National  Bank  of  America  r.  Indiana 

Banking  Co.,  418. 
National  Bank  of  Commerce  v.  Atkin- 
son, 225. 
V.  Galland,  110. 
National   Bank  of  Commonwealth   y. 

Law,  110. 
National   Bank  of   North   America   v. 

Bangs,  147. 
National  Bank  of  Oxford  v.  Kirk,  290. 
National    City    Bank    of    Brooklyn   v. 

Westeott,  125. 
National  Commercial  Bank  v.  Miller. 

125,  419,  421,  423. 
National  Exch.  Bank  v.  Veneman,  265. 
National  Mahaiwe  Bank  v.  Peck,  427. 
National  Newark  Banking  Co.  v.  Sec- 
ond Nat.  Bank,  345. 
National    Park    Bank    v.    Ninth    Nat. 

Bank.  148. 
National  State  Bank  v.  Rising,  247. 
Nay  V.  Lamb,  210. 
Nazro  v.  Fuller,  2.50. 
Neeley  v.  ^IcSparran,  233. 
Nefif  V.  Horner,  251. 
Nelson  v.  Bank,  99,  100.  379. 
V.  Edwards.  215. 
V.  Fotterall,  3.52,  .363. 
Nevada  Bank  v.  Luce.  99. 
Nevius  V.  Bank.  3,S.5,  387. 
Newark     Banking     Co.     v.     National 

Bank  of  Erie,  343. 
Newl)erry  v.  Trowl)ridge,  158. 
Newcomb  v.  Raynor,  305. 
Newell  V.  Doty,  182. 
Newman  v.  Aultman,  Miller  &  Co.,  312. 
V.  Goza.  173. 
V.  Ravenscroft.  1.33. 
V.  Williams.  244. 
New  Orleans  Canal  &  Banking  Co.  ▼. 

Montgomery.  3:'0. 
Newton  v.  Kenncrly,  172. 
New  York  Firemen  Ins.  Co.  v.  Sturpes, 

2:!9. 
Niagara  Dist.  Bank  v.  Falrmnn  &  W. 

Macli.  Tool  Mfg.  Co.,  84.  .350.  359. 
NIcLolls  V.  Diamond,  81,  87. 


oU 


CASES  CITED. 
[The  flgurea  refer  to  pages.] 


Nichols  V.  Blackmore,  341,  347. 

V.  Fearsou,  243,  244. 

V.  Goldsmith.  355. 

V.  Johuson,  247. 
Nicholson  V.  Gouthlt.  390. 

V.  Sedgwick,  197,  202. 
Nickerson  v.  Riiger.  264. 
Nightingale  v.  Withington,  220. 
Noble  V.  Walker,  172,  244. 
Nobles  V.  Bates,  290. 
Noel  V.  Murray,  20. 
Noll  V.  Smith,  254. 
Norrls  v.  Despard.  398,  418. 

V.  Langley,  285,  287. 

V.  Solomon,   28. 
Northam  v.  Latouche,  233,  284. 
Northampton    Nat.    Bank    v.    Kidder, 

309,  320,  334. 
North   Atchison   Bank  v.   Garrettson, 

97. 
Northern  Trust  Co.  v.  Rogers,  419. 
Northwestern    Coal    Co.    v.    Bowman, 

3.S8,  415. 
Northwestern  Iron  Co.  v.  Meade,  80. 
Norton  v.  Dreyfuss,  280. 

V.  Ellam,  344,  360. 

V.  Lewis,  402. 

V.  Waite,   315. 
Norwich  Bank  v.  Hyde,  329. 
Nourse  v.  Prime,  237. 
Noxon  V.  Smith,  61. 
Noyes  v.  Gilman,  196. 


Oakey  v.  TVilcox,  250. 
Oakley  v.  Boorman.  107. 
Gates  V.  Bank.  15.  240. 
Oatnian  v.  Taylor.  .50. 
O'Brien  v.  Smith.  415. 
Ocean  Bank  v.  Dill,  123. 

V.  Fant,  339. 
Ocean  Nat.  Bank  v.  Carll,  264. 

V.  Williams,  362. 
Ocoee  Bank  v.  Hughes,  369. 
O'Conner  v.  Hurley,  21. 
Oddie  V.  National  City  Bank,  425. 
Odell  V.  Buck,  2.30. 
Ogden  V.  Saunders,  164,  3.50. 
Ohio  &  M.  R.  Co.  V.  Kasson,  240. 
Okie  V.  Spencer,  306. 
Olcott  V.  Tioga  R.  Co.,  225. 
Oliver  v.  Bank  of  Tennessee,  395. 
Olsen  V.  Ensign,  275,  328. 


Olvey  V.  Jackson,  21. 
Omaha  Nat.  Bank  v.  Walker,  133. 
Onondaga  County  Bank  v.  Bates,  176. 
Oppeuheimer  v.  Farmers'  &  M.  Bank, 

317. 
Ord  V.  Portal,  213. 

Oregon  Steam  Nav.  Co.  v.  Winsor,  291. 
Oridge  v.  Sherborne,  75,  350. 
Oriental  Bank  v.  Blake,  383,  400. 
Ormes  v.  Beadel,  270. 
Ormsbee  v.  Howe,  264. 
Orr  V.  Lacy,  213. 

V.  Maginnis,  341. 
Orrick  v.  Colston,  106. 
Ort  V.  Fowler,  62,  265. 
Ory  V.  Winter,  186. 
Osborn  v.  Hawley.  51. 

V.  Pearsons,  59. 
Osgood's  Adm'rs  v.  Artt,  107,  108,  134, 

203. 
Osmond  v.  Fitzroy.  230. 
Otisfield  V.  Mayberry.  338. 
Oulds  V.  Harrison.  208. 
Outhwaite  v.  Luntley.  249. 
Outhwite  V.  Porter.  312. 
Overend,  In  re,  301. 
Overman  v.  Bank,  94,  98,  425. 
Overton  v.  Tyler,  51. 
Owen  V.  Barnum,  50. 

V.  Homan,  308. 

V.  Lavine,  85. 

V.  Van  Uster,  87. 
Owings  V.  Arnot,  249. 


Pack  V.  Thomas,  413. 
Pagan  v.  Wylie,  253. 
Page  V.  Cook,  41. 

V.  Gilbert,  376. 

V.  Heineberg.  224. 

V.  Mcn-ell.  258,  26a 
Paine  v.  Noelke.  6. 
Palm  V.  Watt.  255. 
Palmer  v.  Courtney,  168. 

V.  Field,  178. 

V.  Poor,  268. 

V.  Pratt.  35. 

V.  Stephens.  55. 
Pannell  v.  M'Mechen.  306. 
Pardee  v.  Lindley,  136. 
Parish  v.  Stone.  282. 
Park  Bank  v.  Watson,  314,  318. 
Parker  v.  City  of  Syracuse,  39. 


CASES  CITED. 
[Tbe  figures  refer  to  pages.] 


515 


Parker  t.  Conner,  320. 

V.  Gordon,   351,    390. 

V.  Greele,  97. 

V.  Kellogg,  357. 

V.  Plymell,    53. 

V.  Reddick,  345. 

V.  Stroud,  346,  359,  367. 

V.  Totten,  214. 
Parkin  v.  Moon,  330. 
Parr  v.  Eliason,  242,  243. 
Parshley  v.  Heath,  401. 
Parsons  v.  Jackson,  52. 
Partridge  v.  Badger,  224. 

V.  Davis,  110. 
Pasmore  v.  North,  72. 
Passumpsie  Bank  v.  Goss,  267. 
Patience  v.  Townley.  348,  398,  399. 
Paton  V.  Coit.  2^,  334. 
Patterson  v.  Bank,  427. 

V.  Todd,   209. 
Pattillo  V.  Alexander,  110. 
Pattinson  v.  Luckley.  247. 
Patton  V.  Shanklin,  259. 
Paul  V.  Joel,  377. 
Payne  v.  Cutler,  314. 
Peabody  Ins.  Co.  v.  Wilson,  359.  38"^. 
Peacock  v.  Pursell.  365,  368,  369. 

V.  Rhodes,  111,  329. 
Pearce  v.  Wilkins,  177. 
Pearson  v.  Bank  of  Metropolis,  356. 

V.  Garrett,  35. 

v.  Pearson,  278. 

V.  Stoddard.  76. 
Pease  v.  Dwight,  134. 

V.  Hirst,  133. 

V.  Pease,  66. 

V.  Warren.  299. 
Peaslee  v.  Robbins,  113. 
Peck  V.  Cochran,  90. 

V.  Mayo,  189,  342. 
Peets  V.  Bratt,  70,  1.36. 
Pelrce  v.  Pendar,  386. 
Pellecat  v.  Angell,  294. 
Penn  v.  Flack,  329. 
Pennington  v.  Baelir,  407. 
Penny  v.  Innes,  128. 
Pentz  V.  Wintorl)0ttom,  118,  119. 
People  V.  Cromwell,  365. 

V.  D'Argencour,  255. 

V.  Fromme,   245. 

V.  Gates.  245. 

V.  McDermott,  74. 

V.  Tax  Com'rs,  2.30. 
People's  Bank  v.  Keech,  383. 

V.  Legrand,  307. 


Perkins  v.  Franklin  Bank,  75. 

V.  White,   326. 
Perley  v.  Perley,  7,  275. 
Perrine  v.  Canal  Co.,  223. 

V.  Hotchkiss,  237. 
Perry  v.  Smith,  46. 
Peterson  v.  Hubbard,  81. 

V.  Johnson,  281. 
Petit  V.  Benson,  82. 
Peto  V.  Reynolds.  31,  57. 
Pettee  v.  Prout.   12. 
Phelan  v.  Moss,  254,  321. 
Phelps  V.  Church.  110,  132. 

V.  People,  255. 

V.  Sargent,  133. 

V.  Stocking,  387,  388. 

V.  Town,  44. 

V.  Vischer,  140. 
Philadelphia  Bank  v.  NewkirU,  52.  53. 
Phillips  V.  Ford,  55. 

V.  Franklin,  367. 

V.  Gould,  376,  384. 

V.  Poindexter,  3(53. 

V.  Thurn.  156. 

Philpott  V.  Bryant,  341,  356. 
Phipps  V.  Hardiug,  142. 
Phipson  V.  Kneller,  401,  402. 
Phoenix  Bank  v.  Hussey,  24. 
Phoenix  Ins.  Co.  v.  Church,  313,  314. 
Pickett  V.  Merchants'  Nat.  Bank,  240. 
Pier  V.  Heinrichslioffen,  398. 
Pierce  v.  Crafts,  329. 

V.  Indseth,  403. 

V.  Kittredge,  92. 

V.  Schaden,  384. 

V.  Struthers,  161. 
Piersol  v.  Grimes.  247. 
Pierson  v.  Hutchinson,  338L 
Pigot's  Case,  247,  252. 
Pike  V.  Irwin,  100. 

V.  Street,  120. 
Pilkington  v.  Scott.  273. 
Pillans  V.  Van  Mierop,  96. 
Pinard  v.  Klockmann,  25. 
Pindar  v.  Barlow,  285,  287. 
Pine  V.  Smith.  20!). 
Piner  v.  Clary.  370. 
Pinkham  v.  Macy,  .378. 
Pinnes  v.  Ely,  119. 
Pinni-y  v.  Glonson.  4.5. 
Pitman  v.  Hri'ckenrldge,  38. 
Plxlcy  V.  B(»yntoii.  293. 
Planters'  Biitik  v.  Slinrp.  225. 
Planters'  Hauk  of  TenncHsee  v.  Evana. 
131. 


516 


CASES   CITED. 
[The  figures  refer  to  pages.] 


Plato  V.  Reynolds.  341. 
Piatt  V.  Bauli.  44. 

V.  Beebe,  31G. 
Plunimer  v.  Ljiuan,  100. 
Pocklington  v.  Silvester,  349. 
Polk  V.  Spiuks,  398. 
Pomeroy  v.  Tanner,  178. 
Poorman  v.  Mills,  347. 
Pope  V.  Bank  of  Albion,  421. 

V.  Linn.  287. 
Poplett  V.  Stockdale,  288. 
Porter  v.  Cusluuan,  299. 

V.  Kimball.  4U2. 

V.  Pittsburg  Bessemer  Steel  Co., 
327. 
Porthouse  v.  Parker,  397,  401. 
Post  V.  Railway  Co.,  33. 
Potter  V.  I'earson,  4. 

V.  Tallman,  185. 

V.  Tubb.  284. 
Potts  V.  Mayer,  314.  325. 

V.  Whitehead.  80. 
Powell  V.  Jones.  92. 

V.  Waters.  ISl.  182,  243,  30a 
Power  V.  Finnic.  125. 
Powers  V.  French,  193. 
Prentiss  v.  Graves.  123. 

V.  Savage,  18(). 
Prescott  Bank  v.  Caverly,  348. 
President,  etc.,  of  Turnpike  Road  v. 

Hurtin,  1,  6. 
Preston  v.  Wliitney,  50. 
Prevot  V.  Abbott,  133. 
Price  V.  Campbell.  237. 

V.  Easton.  81. 

V.  Neal.  55.  147.  330. 

V.  Price,  20,  147. 

V.  Young.  364. 
Priddy  v.  Henbrey.  176. 
Prideaux  v.  Criddle,  415. 
Prince  v.  Bank,  380. 
Printing  &  Numerical  Registering  Co. 

V.  Sampson,  291. 
Pritchard  v.  Hlrt,  215. 
Prouty  V.  Roberts,  195. 

V.  Wilson,  307. 
Prutsraan  v.  Baker,  71. 
Pruyn  v.  Milwaukee,  172. 
Pufifer  V.  Smith.  2(;5. 
Puget  de  Bras  v.  Forbes,  192. 
Pugh  V.  McCormick.  402. 
Pulllam  V.  Withers.  2.52. 
Pumpelly  v.  Phelps.  07. 
Purcell  V.  Allemong,  413,  417. 


Putnam  v.  Crymes,  59. 

V.  Sullivan,  265,  357,  39a 


Quackenbush  v.  Leonard,  240. 
Quiuby  v.  Merritt,  45. 
Quinn  v.  Fuller,  177. 

V.  Hard,  180. 
Quirk  V.  Thomas,  293. 


Rabberman  v.  Muehlhausen,  8. 

Raborg  v.  Peyton,  86. 

Ramchurn  v.  Radakissen,  365u 

Ramuz  v.  Crowe,  339. 

Rand  v.  Hubbard,  198. 

Ranger  v.  Cary,  345,  347. 

Rankin  v.  Weguclin,  278. 

Rann  v.  Hughes,  4. 

Ransom  v.  Mack,  385. 

Rapelye  v.  Anderson,  175,  241. 

Raplee  v.   Morgan,   172. 

Ratcliff  V.  Planters'  Bank,  353,  357. 

Raubitschek  v.  Bank.  7. 

Rawdon  v.  Redfleld,  389. 

Ray  V.  Smith,  397. 

Raymond  v.  Mann,  397. 

V.  Sellick.  278. 
Rea  V.  Dorrance.  395. 
Read  v.  Bank  of  Kentucky,  37L 

V.  Cutts,  110. 

V.  McNulty,  53. 

V.  Marsh,  98. 

v.  Wilkinson,  85. 
Reamer  v.  Bell,  334. 
Redlich  v.  Doll,  267,  268. 
Redman  v.  Adams.  39,  40. 
Reed  v.  Batchelder,  219. 

V.  Prentiss,  281. 

V.  Roark,  55. 

V.  Wilson,  77,  350. 
Rees  V.  Overbaugh,  247. 
Reg.  V.  Harper,  56. 
Reid  V.  Furnival,  132. 

V.  Morrison,  358. 
Reinicker  v.  Smith,  2.34, 
Reraer  v.  Downer,  376. 
Remsen  v.  Graves,  165,  166. 
Renick  v.  Robbins,  379. 
Renwick  t,  Williams,  208. 


CASES   CITED. 
[The  figures  refer  to  pages.] 


617 


Requa  y.  Collins,  389. 
Eex    V.  Bigg,  108. 

V.  Hunter,  58. 

V.  Lambton,  69. 

V.  Randall,  59. 

V.  Thom,  65. 

V.  Treble,  250. 

V.  Wilcox,  43. 
Rey  V.  Simpson,  141. 
Reynolds  v.  Appleman,  374. 

V.  Dechaums,    234. 

V.  Douglass,  402. 

V.  Peto,  92. 
Rhea  v.  Allison,  314. 
Rhett  V.  Poe,  395,  397,  417. 
Rhine  v.  Robinson.  70. 
Rhodes  v.  Gent,  366. 

V.  Lindley,  45. 
Rice  V.  Grange,  310. 

y.  Hogan,  366. 

y.  Peet,  231. 

V.  Stearns.  120,  121. 
Rich  V.  Starbuck,  59,  118,  25a 
Richards  v.  Barlow,  6. 

V.  Betzer,   281. 

V.  Daily,  208. 

y.  Darst,  136. 

y.  Frankum,  109. 

y.  Griggs,  11. 

y.  Warring,  8. 
Richardson  v.  Carpenter,  38. 

V.  Lincoln,   120. 

y.  Martyr,  34. 

y.  Massachusetts    Charitable   Me- 
chanic Ass'n,  223. 

y.  Rickman,  20. 
Richmond  v.  Diefendorf,  324. 
Riokford  v.  Ridge,  348. 
Rickle  V.  Dow,  112. 
Riddle  v.  IMandeville.  176. 
Ridley  y.  Taylor,  322. 
Riggin  y.  Collier,  24. 
Riggs  V.  American  Tract  Soc.,  231. 

y.  Hatch,  388. 

y.  Lindsay,  80. 
Riker  v.  Mfg.  Co.,  41,  42. 
Riley  y.  Shawackor,  327. 
Ripley  y.  Grant,  229. 

V.  Green  leaf,  76. 
RLsley  y.  Smith,  39. 
Rlvanna  Nav.  Co.  v.  Dawsons,  224. 
Riverside  Iron- Works  v.  Hall,  20. 
Roark  v.  Turner,  172.  244. 
Rohnrts  y.  Tufl<er.  427. 
Robblns  y.  Bacon,  8. 


Roberts  v.  Corbin,  408,  418. 

V.  Jackson,  70. 

V.  Snow,  42. 
Robertson  v.  Allen,  165. 

V.  Burdekin,  180,  188. 

V.  Kensington,  122,  123,  322. 
Robinson  y.  Ames.  341,  343,  396. 

y.  Bartlett,  142. 

V.  Brown,  16,  201. 

y.  Crandall,  214. 

y.  Hawksford,  413,  414. 

y.  Lyman,  208. 

y.  Perry,  208. 

y.  Reynolds,  283. 

V.  Smith.  244. 

y.  Wilkinson,  16. 

y.  Yarrow,  331. 
Rock  y.  Nichols.  281. 
Rock  County  Nat.  Bank  y.  Holllster. 

125,  215. 
Rock  Island  Nat.  Bank  y.  Nelson,  334. 
Rockville  Nat.  Bank  v.  Holt,  305,  307. 
Rockwell  V.  Charle.s,  235. 

V.  Elkhorn  Bank,  224. 
Roehner   y.    Knickerbocker   Life   Ins. 

Co.,  76. 
Roff  V.  Miller,  88. 
Rogers  v.  Blackwell,  228. 

V.  Morton,    194. 

y.  Walker,  229. 
Rogerson  v.  Ladbroke,  428. 
Rolin  V  Steward.  427. 
Roll  y.  Raguet,  289. 
Rosa  V.  Brotherson,  314. 
Rose  V.  Sims,  272. 
Rosenwald  v.  Goldstein,  317. 
Ross  y.  Bedell,  332. 

y.  Espy,  114. 

y.  Hurd,  402. 

y.  Milne,  81. 

y.  Planters'  Bank.  374. 
Rossman  v.  Townsend,  81. 
Rothschild  v.  Ciirrie.  130,  368,  372,  409. 
Rounds  y.  Smith,  423. 
Roucpiette  v.  Ovormann.  187,  403. 
Rousillon  V.  Rousillon,  291. 
Row  V.  Dawson.  8. 
Rowe  V.  TipF>cr.  381.  303. 

V.  Young.  3."t9. 
Rowlands  v.  Spriugott.  .370. 
Kowley  v.  Ball,  '.VAO. 
Thihcy  V.  ruJlxTtson.  12. 
Riicker  v.  ITIilcr.  :?(i!t. 
RncKriiaii  v.  Bryan.  203. 
Hiiddcll  V.  Walkr-r.  IWl. 


518 


CASES  CITED. 
[The  figures  refer  to  pages.] 


Ruff  V.  Webb,  27,  23. 

Kuiz  V.  Keuauld,  97. 

lUimball  V.  Ball,  844. 

liussel  V.  Lanjjstaffe,  112,  258,  259. 

Russell  V.  Ball.  121. 

V.  riiillips.  80. 

V.  Powell,    28. 

V.  Whipple.  17,  30.  70,  136. 

V.  Wiggin,  96. 


Safford  v.  Wyckoff.  224. 
Sager  v.  Tupper,  55. 
St.  John  V.  Honians.  419. 
St.  Louis,  I.  &  M.  S.  Ry.  Co.  v.  Cam- 
den Bauk.  30. 
St.  Louis  Nat.  Stockyards  v.  O'Reilly. 

92. 
St.  Stephen  Branch  Ry.  Co.  v.  Black, 

46. 
Salomon  v.  Hopkins,  56. 

V.  Leather  Co..  379. 
Salter  v.  Burt,  77,  350. 
Saltmarsh  v.  Tuthill,  285. 
Salt  Springs  Bank  v.  Burton,  351.  352. 

V.  Syracuse  Savings  Inst,  156. 
Saltus  V.  Everett,  267. 
Sammons  v.  Ilalloway,  245. 
Sanders  v.  Bacon.  122. 

V.  Blain,  201. 
Sanderson  v.  Bowes,  344,  359. 

V.  Reinstadler.  385,  387. 
Sands  v.  Clarke,  358,  394. 

V.  Lyon,  3.50. 
Sanford  v.  Norton,  363. 
Sargent  v.  Appleton,  305. 

V.  Southgate,  208. 
Saunderson  v.  .Tackson,  56. 

V.  Judge,  355,  388. 
Savage  v.  Aldren,  123. 

V.  King,  203. 
Sawyer  v.  Chambers,  123,  280. 

V.  McLouth,  273.  . 

V.  Patterson.  113. 

V.  Warner,  329. 
Say  V.  Barwick,  234. 
Sayles  v.  Smith,  285. 
Scaife  v.  Byrd,  70. 
Scanland  v.  Porter.  142. 
Schaffner  v.  Ehrman.  427. 
Schepp  V.  Carpenter,  181,  315. 
Schermerhorn  v.  Talmau.  47. 
Bchmied  v.  Frank,  401 


Schniittler  v.  Simon.  39. 
Schniitz  V.  Mining  Co.,  30. 
Sthuoll  V.  Mill  Co..  115. 
Schotield  v.  Bayard.  153.  156.  399. 
Scholetield  v.  Eichelberger.  398. 
Scholey  v.  Ranisbottom.  303. 
SchoUield  v.  Earl  of  Loundesborough, 

254. 
Schoonmaker  v.  Roosa,  278. 
Schroeder  v.  Central  Bauk,  419. 

V.  Turner,  142. 
Schulor  V.  Israel  Bank.  428. 
Schultz  V.  Howard,  142. 
Schwalm  v.  Mclntyre,  252. 
Scliwenk  v.  Yost.  108. 
Scolield  V.  Day,  173.  189. 
Scotland  Co.  v.  Hill,  327. 
Scott  V.  Be  van,  48. 

V.  Lifford,  380. 

V.  Lloyd,  237. 

V.   Lufford,  393. 

V.  Pilkington,   100. 

V.  Sehreeve,  13. 
Scudder  v.  Bank,  92,  100.  184. 
Seabury  v.  Hungerford,  113. 
Seaman  v.  Whitney,  81. 
Searcy  v.  Vance,  44. 
Sears  v.  Lantz.  109. 
Seaton  v.  Scovill.  392. 
Seaver  v.  Lincoln,  362. 

V.  Phelps,  227,  228. 
Second  Nat.  Bank  v.  Basiner.  53. 

V.  Williams.  419. 
Security  Bank  v.  Fuel  Co.,  125. 
Sedgwick  v.  Stanton,  289. 
Seebold  v.  Tatlie.  250. 
Seeley  v.  Engell.  282. 
Seibel  v.  Vaughan.  254. 
Selby  V.  Eden.  3.59. 

V.  McCullough,  20. 

V.  Selby.  55. 
Seligman  v.  Ten  Eyck's  Estate,  13. 
Selser  v.  Brock.  164. 
Semmes  v.  Wilson,  172. 
Seneca  Co.  Bank  v.  Neass.  182. 
Sentance  v.  Poole,  227.  228. 
Senter  v.  Continental  Bank,  418. 
Sergeson  v.  Sealey.  229. 
Serle  v.  Norton,  413. 
Serrell  v.  Railway.  417. 
Seventh  Nat.  Bank  v.  Cook,  426. 
Sewall  V.  Russell.  379,  391. 
Seybel    v.    National    Currency    Bank, 
I      320. 
'  Seyfert  v.  Edison,  180. 


CASES  CITED. 
[The  figures  refer  to  pages.] 


519 


Seymour  v.  Cowing,  71. 

V.  Insurauce  Co.,  172. 

V.  Mickey,  113. 
Shackelford  v.  Hooker.  82,  84. 
Shade  v.  Creviston,  1D7. 
Shadwell  v.  Shadwell,  277. 
Shank  v.  Butsch,  55,  407. 
Sharp  V.  Bailey,  183. 
Shai-pe  V.  Drew,  363. 
Shaver  v.  Ehle,  168. 
Shaw  V.  Camp,  35,  278. 

V.  Clark,  327. 

V.  Knox,  177. 

V.  McKeill,  402. 

V.  Railroad  Co.,  27. 

V.  Smith,  60. 
Shaylor  v.  Mix,  .386,  387. 
Shed  V.  Brett,  302,  379. 
Sheehy  v.  Mandeville,  20. 
Shelburne  Falls  Nat.  Bank  v.  Towns- 
ley,  385,  386,  392. 
Shelby  v.  Judd,  109. 
Sheldon  v.  Benham,  386,  392 

V.  Horton,  402. 
Shelton  v.  Braithwaite,  376. 
Shenton  v.  James,  34,  40. 
Shepard  v.  Hall,  385. 
Shepherd  v.  Chamberlain,  351. 
Sheridan  v.  Mayor,  etc.,  12. 
Sherman  v.  Sherman,  302. 
Shinn  v.  Fredericks,  8. 
Shipley  v.  Carroll,  268. 
Shipman  v.  Bank,  62. 
Shisler  v.  Vandike,  256. 
Shoemaker  v.  Mechanics'  Bank,  387. 
Shoenberger  v.   Lancaster  Sav.   Inst., 

400. 
Shotwell  V.  Webb,  13. 
Shoulters  v.  Allen,  228. 
Shrieve  v.  Duckham,  378. 
Shriner  v.  Keller,  20. 
Shultz  V.  Depuy,  3.32. 

V.  Payne,  258. 
Shuttleworth  v.  Stephens,  58. 
Shutts  V.  Fingar,  305,  346. 
Sice  V.  Cunningham,  345,  347. 
Siebeneck  v.  Anchor  Sav.  Bank,  306. 
Slebold  V.  Davis,  80. 
Siegel  V.  Bank,  49. 
Siffkin  V.  Walker,  66 
Sigourney  v.  Lloyd,  125. 
Simpson  v.  Davis,  7,  275. 

v.  Hall,  210. 

v.  Mouhlen,  43. 

T.  Pacific  Mut.  Life  Ins.  Co.,  424. 


Simpson  v.  Stackhouse,  253. 

V.  Turney,  392. 

V.  White,  403. 
Sims  V.  Smith,  219. 
Sinclair  v.  Baggaley,  287. 

V.  Lyuah,  376. 
Skelton  v.  Dustin,  352. 
Skillman  v.  Titus,  417. 
Slacum  V.  Pomery,  189. 
Slade  V.  Mutrie,  302. 
Sloan  V.  McCarty,  33.  35. 
Slocumb  V.  Holmes,  20. 
Sloman  v.  Cox,  248. 
Small  V.  Smith,  181. 
Smallwood  v.  Vernon,  131. 
Smedes  v.  Utica  Bank,  385. 
Smentek  v.  Coonhauser,  33. 
Smilie  v.  Stevens,  32. 
Smith  V.  Abbott,  83,  85. 

V.  Allen,  30.  31. 

V    Bank,  363. 

V.  Bellamy,   397. 

V.  Boheme,  32.  45. 

V.  Boulton,   377. 

V.  Braine,  334. 

V.  Brittain,  10. 

V.  Caro.  41. 

V.  Chester,  148,  195,  255,  331. 

V.  Clarke,  114,  118,  205. 

V.  Crane.  52,  53. 

V.  De  Witts.  199,  202. 

V.  Eureka  Flour  Mills,  224. 

V.  Ewer,   11. 

V.  Hawkins,  307. 

V.  Hiscock.  211,  282. 

V.  .Tunes,  415. 

V.  .Johnson,  226. 

V.  Kendall.  6,  53,  54,  78. 

V.  Knox,  179. 

V.  Livingston,  264,  334. 

V.  Livingstone,  195. 

V.  Ivownsdale,   401. 

V.  Mace,  248. 

V.  Marsack,  149. 

V.  Miller.  365,  415. 

V.  Moberly,'267. 

V.  Mnllett.  .^87,  :?93. 

V.   Niglitingale.  52. 

V.  Pliilhrick.  72. 

V.   Roacii,  :M2. 

V.  Sac  Co..  .T«. 

V.  Sawyer.    1.54. 

V.  Slinw.  47. 

V.  Shcpanl.  297. 

V.  Slieppard,  255. 


520 


CASES   CITED. 


[The  figures  refer  to  pages.] 


Smith  V.  Smith,  272. 

V.  ^Yhiting,  133,  202,  37G. 

V.  Wilcox,  280. 

V.  Williainsou.  233. 
Smithers  v.  Junker,  36. 
Suaith  V.  Minjiay.  18S,  259, 
Suirts  V.  Overjohn,  2i.iZ>. 
Suow  V.  Perkins,  374,  403. 
Snyder  v.  Stiulebaker,  220. 
Son  res  v.  Glyn,  124. 
Sohn  V.  Morton,  308. 
Solarte  v.  Palmer,  377. 
Solomons  v.  Bank  of  England,  211. 
Sommerville  v.  Williams,  75. 
Souhepan  Xat.  Bank  v.  Boardman,  67. 
Southall  V.  Rigff,  273. 
Southard  v.  Porter,  203. 

V.  Wilson,  213. 
Southern  Masonic  Relief  Tier  Ass'n  v. 

Laud  en  bach,  230. 
Southwick  V.  First  Nat.  Bank  of  Mem- 
phis, 204. 

V.  Sax.  305. 
Sparrow  v.  Chisman,  178. 
Spaulding  v.  Andrews,  93,  98. 

V.  Putnam,  110. 
Spear  v.  Crawford,  224. 

y.  Pratt,  90,  91. 
Speck  V.  Pullman  Car  Co.,  209. 
Spencer  v.  Allerton,  1.34. 

V.  Ballou.  181.  315,  382. 

V.  Carstai-phen,  130. 

V.  Halporn.  109. 

V.  Harvey.  397,  401. 

V.  Tilden,  237. 
Sperry  v.  Horr,  51,  245. 
Spies  V.  Gil  more,  399. 
Spinning  v.  Sullivan,  197. 
Spitler  V.  James,  321. 
Spooner  v.  Holmes.  13,  321. 
Sprague  v.  Duel,  230. 

V.  Sprague,  275. 
Sproat  V.  Matthews,  40,  90,  92. 
Spurgeon  v.  Sraitha,  305. 
Spurgin  v.  McPheeters,  28,  40. 
Stackpole  v.  Arnold,  66. 
Stacy  V.  Kemp.  282. 
Stafford  v.  Yates.  382. 
Stainback  v.  Bank,  303.  390. 
Stalker  v.  McDonald,  313. 
Stam  V.  Kerr.  309. 
Stanton  v.  Allen.  290. 

V.  Blossom.  379.  .382. 
Staples  V.  Franklin  Bank,  351. 
Stapleton  v.  Banking  Co.,  51. 


State  V.  Cilley,  2.52. 

V.  Corpening,  43. 

V.  Iliil,  245. 

V.  Rice,  223. 
State  Bank  v.  Hurd,  356. 

V.  McCoy,    233. 

V.  Slaughter,  383. 
State  Capital  Bank  v.  Thompson,  287. 
State  Mut.  Fire  Ins.  Co.  v.  Roberts,  13. 
Steele  v.  McK inlay,  87,  143. 
Stein  V.  Yglesias,  ISO,  211. 
Steman  v.  Harrison,  97. 
Stephens  v.  Graham,  249,  251. 

V.  Monongaliola  Nat.  Bank,  178. 
Stephenson  v.  King.  278. 
Sterling  v.  Marietta  &  S.  Trading  Co., 

308. 
Sterry  v.  Robinson.  342. 
Stevens  v.  Bruce,  347. 

V.  Oaks,  .300. 

V.  Park,  413. 
Stevenson  v.  Hyland,  312. 

V.  O'Neal.  120. 
Stewart  v.  Anderson,  71. 

V.  Eden,  73,  305,  383. 

V.  Hidden,  290,  302. 

V.  Insall,  281. 

V.  Kennett,  379. 

V.  Lansing,  204. 

V.  Lispeuard,  230. 

V.  :\rillard.  .308. 

V.  Petree.  2.39. 

V.  Smith,  413,  415. 
Stinson  v.  Lee.  66. 
Stix  V.  Mathews,  392. 
Stocken  v.  Collins,  377. 
Stocks  v.  Dob.son,  12. 
Stockwell  V.  Bramble,  92,  98,  104. 
Stoddard  v.  Burton,  297. 

V.  Kimball,  181. 
Stoessiger  v.  South  E.  Ry.  Co.,  56. 
Stone  V.  Clough,  338. 

V.  Frost,  12. 

V.  Peake,  280. 

V.  Rawlinson,  198,  201. 
Storer  v.  I^ogan,  8.5. 
Storm  V.  Stirling.  59. 
Story  V.  Lamb,  8. 
Strange  v.  Price.  378. 
Stratton  v.  Hill.  170. 
Strawbridge  v.  Robinson,  24. 
Streit  V.  Saubora.  287. 
Strong  V.  King.  351.  305. 
Struthers  v.  Kendall.  312. 
Stults  v.  Silva,  33,  30. 


CASES   CITED. 
[The  figures  refer  to  pages.] 


621 


Sturdy  v.  Henderson,  344. 

Sturges  V.  Fourth  Nat,  Bank,  81,  92, 

100. 
Sturtevant  v.  Ford,  ISO,  211. 
Sudler  v.  Collins,  250. 
Suffell  V.  Bank  of  England,  252. 
Suffolk  Sav.  Bank  v.  City  of  Boston, 

327. 
Sullivan  v.  Langley,  264,  334,  335. 

V.  Rudisill,  248. 
Sun  Printing  &  Pub.  Ass'n  v.  Tribune 

Ass'n,  2b6. 
Supervisors  v.  Schenck,  225. 
Suse  V.  Pomp,  171,  342. 
Susquehanna  Bridge   &  Bank   Co.   v. 

Evans,  114. 
Susquehanna  Valley  Bank  v.  Loomis, 

175. 
Sussex  Bank  v.  Baldwin,  354,  357,  361. 
Sutton  V.  Toomer.  252,  344. 
Suydam  v.  Westfall,  178,  237,  295. 
Svendsen  v.  Bank,  427. 
Swasey  v.  Vanderheyden,  218. 
Swayze  v.  Britton,  370,  379. 
Sweet  v.  Chapman,  241,  310. 
Sweetser  v.  French,  114. 
Swem  V.  Newell,  296. 
Swetland  v.  Creigb,  44. 
Swett  V.  Hooper,  172. 
Swift  V.  Tyson.  311. 
Swope  V.  Lets ng well,  300. 

V.  Ross.  79,  83,  295,  296. 
Sylvester  v.  Crapo,  347. 


Taft  V.  Sergeant,  219. 

Talbot  V.  Bank  of  Rochester,  257. 

V.  Clark.  391. 
Talhott  V.  Suit,  25. 
Tappan  v.  Ely,  122. 
Tardeveau  v.  Smith's  Ex'rs,  237. 
Tardy  v.  Boyd,  398. 
Tassell  v.  Lewis,  349. 
Tassey  v.  Church,  49. 
Tatam  v.  Hasiar,  33,5. 
Tatum  V.  Kelley.  29.3. 
Taunton  Bank  v.  Rifhardson,  402. 
Taylor  v.  Atcliison,  235. 

V.  Croker,   149. 

V.  Dobbins,  .oO. 

V.  Drake,   100. 

V.  French,  141. 

V.  Shelton,  60. 


Taylor  v.  Snyder,  72,  357,  358,  399. 

V.  Steele,  29,  31. 
Telford  v.  Patton,  44. 
Temple  v.  Baker,  110. 

V.  Pullen,  259. 
Tenney  v.  Prince,  113. 

V.  Sanborn,  329. 
Terry  v.  Parker,  394. 
Tevis  V.  Young,  56. 
Texas  L.  &  T.  Co.  v.  Carroll,  68. 
Thacher  v.  Dinsmore,  194. 

V.  Pray.  312. 

V.  Stevens,  139. 
Thackray  v.  Blackett.  396. 
Thatcher   v.   West   River  Nat   Bank, 

177,  178,  179. 
Thayer  v.  Elliott,  184. 
Thielman  v.  Gueble,  346. 
Third  Nat.  Bank  v.  Clark,  215. 

V.  Spring,  47. 
Thomas  v.  Railroad  Co.,  223. 

V.  Roosu,  45. 

v.  Shoemaker,  76. 

V.  Thomas,  193. 
Thompson  v.  Clubley,  178. 

V.  Cumming,  342. 

V.  Ketcham.  356. 

V.  Shepherd,  177. 

V.  Sloan,  43,  46,  47 

V.  Waters,  224. 

V.  Wliitmarsh,  65. 

V.  Williams,  374,  384. 
Thomson  v.  Lee  Co.,  206. 
Thorn  v.  Bell,  256. 

V.  Rice,  387. 
Thornburg  v.  Emmons,  344. 
Thornton  v.  Dick,  88. 
Thorp  V.  Craig,  186. 
Thorpe  v.  Booth,  344. 

V.  Peck,  351. 
Thurman  v.  Van  Brunt,  74. 
Thurston  v.  Cornell,  238. 

V.  M'Kown,  347. 
Tibbets  v.  Gerrish,  10. 
Ticonic  Bank  v.  Stackpole,  37(X 
Tidmarsh  v.  Grover.  250. 
Tiernan  v.  .lackson.  79. 

V.   Woodruff,  306. 
Tillman  v.  Ulu-eler,  140. 
Tiiniiis  V.  Slinnnon,  13. 
Tindal  v.  lirown.  373,  .380.  384.  300. 
Tinl<cr  v.  .McCauley,  110,  132. 
Titcomb  v.  Tiioina.s,  134. 

V.  Vantylc,  230. 
'  Tittle  V.  Tliouias,  59. 


622 


CASES   CITED. 
(The  figures  refer  to  pages.] 


Tobey  v.  Rarber,  3G5. 

V.  Leuuif?.  374. 
Toby  V.  .Miuiiiau,  400. 
Todd  V.  Neals  Adm'r,  403. 
Toiubi'ckbee  Bank  v.  Dumell,  363. 
Tool  Co.  V.  Norris,  2SU. 
Towue  V.  Rice,  40,  12^">. 
Town  of  Solon  v.  Williamsburgh  Sav. 

Hauk,  2(18. 
Towu  of  Thompson  v.  Penine,  206. 
Towuseud  v.  Derby,  6,  74. 

V.   Lorain  Hank,  36l>,  378. 
Townsley    v.    Sum  rail,    100,    101,   403, 

416. 
Ti-abue  v.  Short,  187. 
Tracy  v.  Alvord,  278. 

V.  Talniaj,'c,  204. 
Traders'  Hauk  v.  Bradner,  315. 
Tranimell  v.  Huduion,  173. 
Trask  v.  Martin,  75. 
Trent  Tile  Co.   v.  Ft.   Dearborn  Nat. 

Bank  of  Chicajjo,  70. 
Treuttel  v.  Baraudon,  126,  321. 
Trickey  v.  Larue,  278. 
Trieber  v.  Couiuiercial  Bank,  287. 
TrifiTfis  V.  Newnham,  351. 
Trinil)ey  v.  Vijjnier,  188. 
Triplett  v.  Hunt,  3S2. 
Tripp  V.  Curtenius.  27. 
Trotter  v.  Curtis,  2,38. 
Trow  V.  Glen  Cove  Starch  Co.,  2.55. 
Troy  City  Bank  v.  Lauman,  84,  356. 
True  V.  Collins,  .388. 

▼.  Fuller,  132. 
Trueman  v    Fen  ton,  272. 

V.  Hurst,  220. 
Trustees  of  Union  College  v.  Wheeler, 

13. 
Tryon  v.  Oxley.  65. 
Tunno  v.  League,  398. 
Turnbull  v.  Bowyer,  164,  331, 
Turner  v.  Brown,  244. 

V.  Keller,  1»>4. 

V.  Leach.  398. 

V.  Leech,  3S1,  392. 

V.  Mead,  348. 

V.  Mining  Co..  .346. 

V.  Samson,  395. 

V.  Treadway,  313. 
Tuttle  V.  Bartholomew,  109. 

V.  Catlin,  81. 

V.  Standish.  .3.39. 
Tye  V.  Gwynne.  278. 
Tyler  v   Cirli-sle.  203. 

V.  ftardiner.  269. 


Tyler  v.  Gould,  79,  419. 

V.  Young,  209. 
Tyson  v.  liickard,  237. 


u 


Ulster  County  Bank  v.  McFarlan,  99, 
Underhill  v.  Phillips,  74. 
Union  Bank  v.  Fowlkes,  353. 

V.  Hyde,  24,  342,  370,  416, 

V.  Middlebrook,  256. 

V    Willis,  142. 
Union  Foundry  &  P.  C.  W.  Works  v. 

New  York  L.  D.  Co.,  280. 
Union  Nat.  Bank  v.  Hunt,  226. 

V.  Oceana  Co.  Bank,  418. 
United  States  v.  Grossmayer,  398. 

V.  National  Park  Bank,  257. 

V.  White,  16,  202. 
Upham  V.  Prince,  110. 


Valle  V.  Cerre,  09. 

Vallett  V.  Parker,  71,  235,  267,  283-285. 

Valley  Nat.  Bank  v.  Crowell,  49. 

Vanauken  v    Hornbeck,  248. 

Vanbibber  v.  Louisiana  Bank,  426. 

Van  Brunt  v.  Eoff,  248. 

Van  Buskirk  v.  Insurance  Co.,  11. 

Vance  v.  Collins,  .387. 

Van  Deusen  v.  Sweet,  227,  229. 

Vandewall  v.  Tyrrell,  154. 

Van  Duzer  v.  Howe,  178,  238,  253. 

Van  Heath  v.  Turner,  2. 

Van  Keuren  v.  Cork  ins,  12. 

Vanliew  v    Second  Nat.  Bank,  195. 

Van  Patten  v.  Beals,  227,  228. 

Van  Schaack  v   Stafford.  241. 

Van  Staphorst  v.  Pearce,  90. 

Van  Vechten  v.  Pryn,  .387. 

Van  Vleet  v   Sledge,  115. 

Van  Wart  v.  Woolley.  80. 

Vanwickle  v.  Downing,  307. 

Vanzant  v.  Arnold,  110. 

Vathir  v.  Zane,  104. 

Veazie  Bank  v.  Paulk,  242. 

Veeder  v.  Mudgett.  226. 

Verbeck  v.  Scott,  327. 

Vere  v.  I^wis,  406. 

Viale  V.  Michael.  383. 

Vilet  V.  Camp.  185. 

Vinton  v.  King,  209. 


CASES  CITED. 
[The  flgureB  refer  to  pages.] 


523 


Vinton  v.  Peck,  68,  285. 

Violett  V.  Patton,  187,  259. 

Vogle  V.  Ripper,  255. 

Voorhees  v.  Voorhees,  269. 

Vosburgb  v.  Diefendorf,  264,  324,  834. 

Vyse  V.  Clarke,  56. 


w 


Wackerbarth,  Ex  parte,  103,  156,  801. 
Wade  V.  Creighton.  141. 
Wadlinjton  v.  Covert,  37 
Wadsworth  v.  Sharpsteen,  230. 
Wait  V.  Pomeroy,  246,  253.  254. 
Wakefield  v.  Greenhood,  100. 
Waldo  Bank  v.  Lumbert,  183. 
Walker  v.  AtTvood,  84. 

V.  Bank  of  Missouri,  86,  88,  386. 

V.  Bank  of  State  of  New  York,  86. 

V.  Clay,  329. 

V.  Ebert.  265. 

V.  Hamilton,  173. 

V.  Macdonald,  118. 

V.  Roberts,  40. 

V.  Stetson,  157,  341,  343. 

V.  Turner,  370. 

V.  Woollen,  36. 
Wall  V.  Hill.  230. 
Wallace  v.  Agry,  341,  343,  347,  365. 

V.  Crilley.  351. 

V.  McConnell.  80,  359. 
Walmsley  v.  Cbild.  4. 
Walrad  v.  Petrle,  59. 
Walsh  V.  Dart,  187,  352. 

V.  Hunt,  254. 
Walter  v.  Haynes,  388. 

V.  Kirk,  120. 
Walters  v.  Brown,  387. 
Walton  V.  Hastings,  249. 

V.  Williams,  87. 
Walton  Plow  Co.  v.  Campbell,  248. 
Walwyn  v.  St.  Quintin.  395. 
Walz  V.  Alback,  141. 
Ward  V.  Allen,  91. 

V,  Churn.  OS. 

V.  Evans,  20,  2L 

V.  Howard.  .S14. 

V.  Perrin,  3.S9. 

V.  Sugg,  241. 
Warden  v.  Howell,  181. 
Wardens  &   Vestrymen   of  St.  .Tames' 

Church  V.  Moore.  14."^. 
Warder  v.  Gibbs,  177. 

V.  Tucker.  i:50.  395. 


Warder,   Bushnell  &  Glessner  Ccx.  r. 
Gibbs,  201. 

V.  Willyard,  248. 
Waring  v.  Betts,  399. 

V.  Smyth,  247. 
Warner  v.  Whittaker,  13,  197. 
Warren  v.  Durfee,  278. 

V.  Gilman,  378,  387. 
Warren  Bank  v.  Parker,  354. 
Warren    Deposit   Bank    v.    Robinson, 

239. 
Warrington  v.  Early,  252. 
Washington  Bank  v.  Lewis,  312. 

V.  Triplett,    187. 
Washington  Co.  Mut  Ins.  Co.  v.  Mil- 
ler, 42. 
Wasson  v.  Lamb,  125. 
Waterman  v.  Vose,  251. 
Watervliet  Bank  v.  White,  118,  119. 
Watkins  v.  Bowers,  71. 

V.  Crouch,  359. 

V.  Maule,   203. 
Watrous  v.  Halbrook,  58. 
Watson  V.  Evans.  60,  61. 

V.  Loring,  342. 

V.  New  England  Bank,  213. 

V.  Randall.  282,  315. 

V.  Russell,  282. 
Watt  V.  Riddle,  173. 
Way  V.  Butterworth,  142. 

V.  Richardson,   12. 

V.  Smith.  33. 

V.  Towle,  406. 
Wayland  University  v.  Boorman,  223. 
Waynam  v.  Bend,  320. 
Weaver  v.  Barden,  309,  313,  325. 
Webb  V.  Morgan,  215. 
Webster  v.  Calden,  330. 

V.  Cobb,  113,  132,  133. 
Weckler  v.  First  Nat.  Bank,  223. 
Weeks  v.  Esler,  25. 
Wegersloffe  v.  Keene,  82.  366. 
Weidler  v.  Kauffman,  IL 
Weidman  v.  Symes,  2.'38. 
Weil,  Succession  of,  165. 
Weiustock  v.  Bellwood,  418. 
Welch  V.  Carter,  2S1. 

V.  Goodwin.  257. 

V.  Lindo,   120. 

V.  Sage,  :i21. 
Wcldon  V.  Biick.  160,  101,  342. 
Wolfnrd  v.  Beazoly,  56. 
^^■»■!!iIlgtnn  v.  .Ijicks<in,  r>r>,  258. 
Wells  V.  Mrighain.  1.  7.  81. 

V.   Hopkins,  2.S(). 


524 


CASES  CITED. 
[The  figures  refer  to  pages.] 


Wells  V.  SchooDover,  12. 

V.  Whitehead.  '2't. 
Wentworth  v.  Clap,  7G. 
West  V.  Brown,  391. 

V.  Russell.  230. 
West  Boston  Sav.  Bank  t.  Thompson, 

298. 
Westerfield  v.  Jackson,  231. 
Western   Cottage   Organ   Co.   v.   Red- 
dish, 223. 
Westminster  Bank  v.  Wheaton,  406. 
Weston  V.  Hight,  278. 
West  River  Bank  v.  Taylor,  380.  382. 
West  St   Louis   Sav.   Bank  y.  Bank, 

322. 
Wethey  t.  Andrews,  345. 
Whaley  v.  Houston,  303. 
Wheatley  v.  Strobe,  28. 
Wheeler  v.  Barret,  209. 

V.  Field.  358,  400. 

V.  Guild.  297. 

V.  Warner,  366. 
Wheelock  v.  Freeman.  253. 
Whigham  v.  Pickett,  245. 
Whistler  v.  Forster,  106.  134,  203,  204, 

408,  410. 
Whitaker  v.   Bank   of   England,   427, 

4129. 
Whitbeck  v.  Van  Xess,  21. 
White,  Ex  parte,  252. 

V.  Continental    Nat.    Bank,    125, 
151,  152.  257. 

V.  Cusbing.  32. 

V.  Haas.  250. 

V.  Kuntz.  288. 

V.  Madison.  66. 

V.  Miners'  Nat.  Bank,  125. 

V.  Stoddard.  349. 
Whitehead  v.  Walker,  342. 
Whitehouse  v.  Hauson,  142. 
W'bite   Sewing   Mach.   Co.   v.   Dakln, 

247. 
Whitfield  V.  Savage,  402. 
Wbitmer  v.  Frye,  251. 
Whitney  v.  Dutch,  219. 

v.  Snyder,  265. 
Whlttaker  v.  Edmunds,  333» 

V.  Howe,  291. 
Whittier  v.  Graffam,  357. 
Whitwell  V.  Bennett,  329. 

V.  Winslow,  10. 
Whitworth  v.  Adams,  242,  243. 
Wickes  v.  Caulk,  247. 
WiCfen  v.  Roberts,  175,  239,  352. 
Wiggin  V.  Bush,  235. 


Wiggles  worth  v.  Steers,  232. 
Wilde  V.  Sheridan,  88. 
Wilders  v.  Stevens,  135. 
Wllkle  V.  Roosevelt,  243. 
Wilkinson  v.  Adam,  376. 

V.  Johnson.  147,  156. 

v.  Lutwidge,  147. 
Wlllcox  V.  Jackson.  234. 
Wlllets  V.  Bank,  59,  60,  406,  410,  421, 

422. 
Williams  V.  Baker,  172. 

V.  Bank    of    United    States,    888, 
389,  416. 

V.  Cameron,  229. 

V.  Germaine,  102,  153,  154. 

V.  Matthews.  210. 

V.  Potter,  125. 

V.  Robbins.  66. 

V.  Smith.  315.  316.  ^9. 

T.  Teshomingo  Sav.  Inst.,  164. 

V.  Wade.  187. 

V.  Waring.  353. 

v.  Williams,  4. 

v.  Winans.  100. 
Williamson  v.  Brown.  319. 

V.  Watts,  218.  220. 
Willis  V.  Green,  364,  383. 

V.  Sharp.  64,  65. 

V.  Trambly,  197. 
Willmarth  v.  Crawford,  178. 
Willoughby  v.  Comstock,  50. 
Willoughby's  Case,  28. 
Willse  V.  Whitaker.  123. 
Wilmarth  v.  Crawford.  285. 
Wilson  V.  Campbell.  42. 

V.  Clements.  100. 

V.  Ellsworth.  194. 

V.  Lazier.  333. 

V.  Nisbet.  233. 

V.  Rocke,  334, 

V.  Senier.  397. 

V.  Swabey.  382. 

V.  Tolson,  125. 
Wilson   Sewing-Mach.   Co.   v.   Spears, 

12. 
Wilton  V.  Eaton.  272. 
Winberry  v.  Koonce.  11. 
Winchell  v.  Carey.  287. 
Windham  Bank  v.  Norton.  398.  399. 
Windsor  Sav.  Bank  v.  McMahon,  53. 
Wiug,  In  re,  229. 

V.  Terry,  100. 
Winsted  Bank  v.  Webb,  240. 
Winter  v.  Drury.  79. 

V.  Livingston,  278. 


CASES  CITED. 
[The  figures  refer  to  pages.] 


525 


Wintermute  v.  Post,  85. 

Wintbop  V.  Pepoon,  312. 

Wisdom  V.  Becker,  65. 

Wise  V.  Cliarltoa,  48. 

Wiseman  v.  Chiapella,  353. 

Wolcott   V.   Van   Santvoord,   80.    144, 

250,  367. 
Wolfe  V.  Jewett,  353. 
Wolford  V.  Andrews,  369. 
Wood  V.  Callaghan,  388. 

V.  Corl,  75. 

V.  Gibbs,  184,  187. 

V.  McKean,  209. 

V.  Mullen,  340. 

V.  Pugh,  155. 

V.  Sheldon,  169. 

V.  Steele,  246,  249. 

V.  Watson,  374. 
Woodbury  v.  Woodbury,  134. 
Woodcock  V.  Bennet,  368. 
Woodford  v.  Dorwin,  68. 
Woodbull  V.  Holmes,  181. 
W^oodin  V.  Foster,  356,  373,  384.  385. 
Woodland  v.  Fear,  427. 
Woodman  v.  Thurston,  401. 
Woodruff    V.    Merchants'    Bank,    406, 

409. 
Woods  V.  Armstrong,  235. 

V.  Ridley,  186. 

V.  Woods,  21,  296. 
Woodthorpe  v.  Lawes,  377,  380. 
Woodward  v.  Foster,  115. 

V.  Rowe,  3. 
Woodworth  v.  Bank  of  America,  250, 
358. 

V.  Huntoon,  134,  326,  327. 
Wooley  V.  Lyon,  388.  403. 
Worcester  Bank  v.  Wells.  97. 
Worcester  County  Bank   v.  Dorches- 
ter &  M.  Bank,  208,  321. 
Worden  v.  Dodge,  38. 


Workman  v.  Wright,  256. 
Works  V.  Hershey,  36,  40. 
Wormley  v.  Lowry,  314. 
Worth  V.  Case,  69,  7U,  277. 
Worthington  v.  Cowles,  170. 
Wright  V.  Crabbs,  293. 

V.  Hart,  44. 

V.  Irwin,  194,  333. 

V.  Pipe  Line  Co.,  220. 
Wyatt  V.  Wallace,  235. 
Wyld,  Ex  parte,  154. 
Wynne  v.  Raikes,  98. 


Yale  V.  Ward's  Ex'r,  24. 

Yates,  Ex  parte,  108. 

Yeaton  v.  Bank  of  Alexandria,  177. 

Yellow  Medicine  Co.  Bank  v.  Tagley, 

265.  267. 
Yiugling  V.  Kohlhass,  16. 
Yocum  V.  Smith,  254. 
York  Co.  M.  F.  Ins.  Co.  v.  Brooks,  164, 
Young  V.  Adams,  43. 

V.  Bryan,  24,  416. 

V.  Glover,  108. 

V.  Grote.  151,  251,  253,  254,  268. 

V.  Hill.  240. 

V.  Hockley,  178. 

V.  Lehman,  257. 

V.  Shriner,  208. 

V.  Stevens,  230,  231. 
Y'oungs  V.  Lee,  314,  315. 


Zalbriskie  v.  Cleveland,  C.  &  C.  R.  Co.. 

165. 
Zeller  v.  German  Sav.  Inst.,  418. 
Zimmerman  v.  Anderson,  51. 


INDEX. 

[the  figures  refer  to  pages.] 


A 

ACCEPTANCE, 
defined.  24,  78. 
effect,  79. 

classification  of  acceptances,  80. 
may  be  express,  constructive,  oral,  or  written,  81, 
in  what  name,  81. 
wliile  bill  is  incomplete,  81. 
must  be  according  to  tenor  of  bill,  80,  82. 
immaterial  departures  from  tenor  of  bill,  82,  84. 
qualified  acceptance,  82,  84. 
conditional  acceptance,  82,  84. 
who  may  accept,  81,  86,  101. 
necessity  for  delivery  of  acceptance,  88. 

forms  and  varieties  of,  as  verbal,  written,  and  Implied  from  conduct,  89. 
evidence  of,  89.  90. 
written  acceptance,  89,  90. 
verbal  or  parol  acceptance,  89,  91,  99. 
implied  from  conduct,  89,  93. 

detention  of  bill,  94.  ^ 

destruction  of  bill,  94. 
on  separate  paper,  95. 
promise  to  accept,  95. 
parol  promise  to  accept,  99. 
time  allowed  for  acceptance,  103. 
accommodation  acceptor,  see  "Accommodation.** 
liability  of  acceptor,  144,  146,  151. 
facts  which  acceptor  admits,  or  warranties,  146,  151. 

see  "Estoppel." 
damages  against  acceptor,  170. 
for  honor  or  supra  protest.  101. 

liability  of  acceptor  supra  protest.  ir>2. 

steps  necessary  to  consummate  liability  of.  ir>2. 

presentment  to  drawee  at  maturity,  l."»2. 

protest  on  nonpayment  l)y  dr.'iwee,  l.^»2. 

presentment  to  acceptor  supra  protest,  l.'')2. 

protest  on  nonpayment  by  acceptor  sui)im  protest,  1521 
NEG.BILLS  (OL'T) 


528  INDEX. 

[The  figures  reler  to  pages.l 

ACOEPTANCE-Cont'd. 

uotice  on  nonpayment  by  acceptor  supra  protest,  153. 
undertaking  by  drawer,  tJuit  drawee  has  capacity  to  accept,  159. 

that  drawee  will  accept,  159. 
of  check,  411). 

see  "Presentment." 

ACCEPTOR, 

of  bill,  defined,  23. 
relation  to  bill,  79. 
liability  of,  144,  146,  15J. 

Bee  "Acceptance." 
facts  whic'i  he  admits,  or  warranties,  146,  151 

see  "Estoppel." 
capacity  of,  warranty  by,  or  estoppel  of  indorser,  162. 
damages  against,  170. 

accommodation  acceptor,  see  "Accommodation." 
flupra  protest,  liability  of,  152. 

stepa  necessary  to  consummate  liability  of,  152. 
presentment  to  drawee  at  maturity,  152. 
protest  on  nonpayment  by  drawee,  152. 
presentment  to  acceptor  supra  protest,  152. 
protest  on  nonpayment  by  acceptor  supra  protest,  152. 
notice  on  nonpayment  by  acceptor  supra  protest,  153. 
t)y  what  law  contract  determined,  183. 

ACOOMMODAl  ION, 

accommodation  party  defined,  176. 

liability  of,  17G. 
persons  accommodated,  176. 

liability  of,  17G. 
diversion,  180. 

overdue  accommodation  paper,  211. 

when  accommodation  paper  has  inception,  as  against  defense  of  usury,  241. 
payment  by  accommodated  party   a  discharge,  2U(J. 
nayment  by  accommodation  acceptor  or  maker  a  discharge,  29flw 

see  "Corporations." 

ACCORD  AND  SATISFACTION, 
see  "Defenses." 

ACTION, 

who  may  sue,  10-12,  212. 

form  of,  what  law  determines,  190. 

ADMINISTRATORS. 

see  "Executors  and  Administrators.** 

AGENTS, 

see  "Principal  and  Agent.'* 

ALLONGE, 

defined,  106. 


INDEX.  629 

[The  figures  refer  to  pages.] 

ALTERATION  OF  INSTRUMENT, 

as  a  defense,  246,  248. 

negligence  facilitating,  253. 

blanks,  when  may  be  filled,  258. 

writing  contract  over  indorsement  in  blank,  112,  113. 

warranty  by,  or  estoppel  of,  indorser,  162. 

AMOUNT, 

see  "Bill  of  Exchange";   "Promissory  Note." 

ANOMALOUS  INDORSEMENT, 

see  "Indorsement." 

ANTECEDENT  DEBT, 
whether  value,  310. 

see  "Purchaser  for  Value  without  Notice.** 

ASSIGNMENT, 

assignability  distinguished  from  negotiability,  9. 
whether  writing  an  indorsement  or  assignment,  109, 
of  non-negotiable  instruments,  8-14. 

action  by  assignee,  10. 

notice  of  assignment,  11. 

consideration,  12. 

subject  to  equities  between  prior  parties,  13. 

ATTORNEY'S  FEES. 

stipulation  in  bill  or  note  for  payment  of,  effect,  50. 

B 

BANKRUPTCY, 

of  holder,  transfer  by  operation  of  law,  198. 

of  party  to  be  notified  of  dishonor,  notice  to  whom,  384. 

BILL  OF  EXCHANGE, 
defined,  22. 

foreign  bill,  22. 

inland  bill,  22. 
origin  of  bills,  1. 
parties  defined,  23. 
form,  23. 

essentials,  in  general,  26. 
indicia  of  negotiability,  14. 

negotiability  not  necessary  to  form  or  substance  of,  1. 
origin  of  negotiability  of,  1. 
date,  72. 

place  of  date,  72. 

necessity  for  and  meaning  of  "value  received,"  73. 
days  of  grace,  75. 
order  contained  in  bill,  27. 

certainty  as  to  terms,  31. 

uncertainty  as  to  event,  31,  33. 

NEG.BILLS.— 34 


530  INDEX. 

[The  figures  refer  to  pactaj 

BILL  OF  EXCHANGE— ContU 

imcertuiuty  as  to  time,  31,  35. 

payiueut  out  of  particular  fund,  32,  87. 

additional  couditlon  or  agreement  not  of  essence  of  order,  42,  48. 

giving  iiolder  option  between  payment  In  money  or  some  other  thing, 
42.  50. 

payable  on  demand  or  at  sight,  etc.,  32,  40. 

no  Lime  of  payment  expressed,  32,  41. 

payable  in  installments,  32,  41. 

must  be  for  pnyment  of  money  only,  42. 

payment  In  piuijerty  otJier  than  money,  42,  45. 
option  given  holder,  42,  50. 

performance  of  other  acts  in  addition  to  payment  of  money,  42,  48. 

detiuition  of  money,  43. 

amount  must  be  certain,  42,  52» 
interest,  42,  52. 
exchange,  42,  52. 

payable  in  foreign  money,  46L 
■pecitication  of  parties,  54. 

signature  of  parties,  54,  55w 

certainty  as  to  parties,  56. 

designation  of  drawee,  54,  57. 

designation  of  payee,  54,  59. 

payable  to  order  of  maker,  54,  61. 

payable  to  fictitious  person,  54,  61. 
delivery,  67. 

in  escrow,  67. 

upon  condition,  70. 
discount  of  bill  by  drawee  before  acceptance,  79. 
relation  of  drawee  to  bill  before  acceptance,  79. 
acceptance,  see  "Acceptance." 
accommodation  parties,  see  "Accommodation." 
payment  by,  19-21. 
non-negotiable  bill,  7. 
liability  of  drawer,  156. 
undertaking  of  drawer,  159. 
liability  of  acceptor.  144,  146,  151. 

see  "Acceptance." 
facts  which  acceptor  admits,  146,  151. 

see  "Estoppel";   "Warranties." 
liability  of  indorser,  see  "Indorsement** 

BLANK, 

indorsement  In  blank.  110. 

Indorsement  written  on  blank  note.  111,  112, 

BLANKS. 

when  may  be  filled.  258. 

BONA  FIDE  HOIJ>ER. 

see  "Purchaser  for  Value  without  Notice.* 


INDEX.  531 

[The  flsuret  refer  to  pages.! 

BURDEN  OF  PROOF, 

as  to  whether  one  is  a  pxirchaser  for  value  without  notice,  827. 

c 

CANCELLATION, 

discharge  of  instrument  by,  802. 

CAPACITY, 

of  parties  to  contract,  63. 

see  "Defenses." 
of  drawer,  admission  by  acceptor,  146. 
of  drawee  to  accept,  undertaliing  of  drawer,  1f>ft 
of  prior  parties,  warranty  by  or  estoppel  of  indorser,  162. 

CERTAINTY, 

as  to  order  in  bill  or  promise  in  note,  HI, 
as  to  amount  to  be  paid,  42. 
as  to  parties,  54. 

CERTIFIED  CHECK, 
in  general,  4iy. 
see  "Check.'* 

CHECK, 

defined,  404. 

distinguished  from  bill  of  exchange,  404,  405,  408. 

date,  405,  408,  409. 

must  be  payable  on  demand,  406. 

memorandum  checlvs,  407. 

drafts  on  bank  in  another  state,  408. 

checks  as  negotiable  instruments,  408. 

when  overdue,  410. 

presentment,  protest,  and  notice  of  dishonor,  effect  of  delay,  412, 

when  must  be  presented,  413. 

delay  in  presentment,  when  discharges  drawer,  413. 

failure  to  give  notice  of  dishonor,  when  discharges  drawer,  415. 

protest  not  essential,  41G. 

excuses  for  failure  to  present,  416. 

status  of  stale  check    41'^. 
rights  of  holder  against  bank,  418. 
certification  and  acceptance,  410. 

meaning  of  certification,  420. 

effect  of  certification,  421. 

discharge  of  drawer  and  Indorsers  by  certification  or  acceptance,  422. 

certification  at  instance  of  drawer,  424. 

parol  acceptance  by  bank,  effect,  424. 
payment  on  unauthorized  Indorsement,  426. 
failure  of  bank  to  honor  check,  427. 
payment  by,  19-21. 

CHOSE  IN  ACTION, 

see  "Assignment";   "Nonnegotlable  Instruments.'* 


532  INDEX. 

CThe  figures  refer  to  pagei.] 

COLLATERAL  SECURITY, 

transfer  of  bill  or  note  as,  whether  for  value,  310. 
bills  transferred  as,  presentment,  364. 

see  "Purchaser  for  Value  without  Notice." 

C50MM0N  COl'NTS, 

when  available  In  action  on  bill  or  note,  328,  note,  67. 

WNDITIONAL  ACCEPTANCE, 
in  general,  82,  84. 

see  ••Acceptance." 

CONT)ITIONAL  INDORSEMENT, 

In  general.  119,  121. 
see  "Indorsement." 

CONFLICT  OF  LAWS, 

validity  and  execution  of  contract,  by  what  law  determined,  183,  184. 

interpretation  and  obligation  of  contract,  by  what  law  determined,  183,  186. 

damages,  by  what  law  determined,  188. 

remedy,  by  what  law  determined,  190. 

presentment,  protest,  and  notice  of  dishonor,  by  what  law  determined,  402. 

CONSIDERATION, 

defined,  sufficiency,  276. 

necessity  for  and  meaning  of    value  received,"  73, 

bill  or  note  imports  a  consideration,  5-7,  73,  274. 

want  or  failure  of,  as  a  defense,  270,  276. 

for  assignment  of  nounegotiable  instrument,  12, 

illegality  of,  234,  283. 

statutory  prohibition,  234,  283. 

violation  of  the  Sunday  laws,  285. 
other  statutes,  287. 
common-law  prohibition,  288. 
contravention  ol  public  policy,  289. 
in  general,  289. 
restraint  of  trade,  290. 
effect  of  illegality,  291. 

Illegality  as  being  total  or  partial,  291. 
knowledge  of  illegality.  Intention,  292. 
accommodation  paper,  see  "Accommodation," 

OONSTRUCn'IVE  NOTICE, 
see  "Notice." 

CORPORATIONS, 

ultra  vires  acts.  Instruments  executed  by,  63,  222. 

Indorsement  and  transfer  by,  63,  222. 

accommodation  paper  made  by,  bona  fide  purchaser,  183. 

Instrument  payable  to  "cashier"  or  other  officer,  who  may  indorse,  183^ 
note  96. 
COUNTERCLAIM. 

paper  transferred  after  maturity,  not  subject  to,  207,  note  53. 


INDEX.  533 

[Tbe  figures  refer  to  pages.] 

COVERTURE, 

see  "Married  Women." 

CURRENT  FUNDS, 

instrument  payable  in,  effect,  44. 

CUSTOM  OF  MERCHANTS, 
defined  and  explained,  2, 

D 

DAMAGES, 

against  acceptor,  maker,  drawer,  and  indorsers,  upon  the  bill  or  note,  and 

upon  the  warranties,  160,  170-176. 
re-exchange,  when  an  item,  170,  171,  173. 
when  drawee  refuses  to  accept,  170,  173. 
for  breach  of  warranty,  170,  174. 

rate  of  interest  payable  as,  by  what  law  determined,  188. 
payable  in  lieu  of  re-exchange,  by  what  law  determined,  189. 
measure  of,  recoverable  by  indorsee  of  accommodation  paper  who  has 

paid  less  than  face  value,  243. 

Date, 

of  bill  or  note,  72. 

day  of,  excluded  in  calculating  date  of  payment,  78, 
place  of,  prima  facie  place  of  issue,  188. 
see  "Blanlis." 

DAYS  OF  GRACE, 
defined,  75,  349. 
how  computed,  76. 
by  what  law  determined,  186. 
what  instruments  entitled  to,  344. 

DEATH, 

of  holder,  transfer  by  operation  of  law,  198. 

of  joint  payee  or  indorsee,  rights  of  survivor,  198. 

of  malier  or  acceptor,  presentment  to  whom,  364. 

of  party  to  be  notified  of  dishonor,  notice  to  whom,  383. 

DEFENSES, 

as  against  immediate  party,  and  as  against  purchaser  for  value  without 

notice,  210-308. 
as  real  or  personal,  216. 
real  defenses,  218. 
coverture,  221. 

instruments  executed  by  married  woman,  221. 

indorsement  by  married  woman,  221. 
Infants,  220. 

instruments  executed  by,  220. 

Indorsements  by,  220. 
corporations,  ultra  vires,  222. 

instruments  executed  by,  222. 

indorsements  by,  222. 


634  INDEX. 

[The  figures  refer  to  pasec] 

DEFENSES— Cont'd. 

persuus  nuu  cumpos  mentis,  220. 
lustruuients  executed  by,  2l!6i. 
ludorseiueuts  by,  22C>. 
drunken  persons,  22l>. 

instruments  executed  by,  220. 
indorsements  by,  22G. 
Instruments  avoided  by  statute,  234, 
usury,  23G. 

failure  to  aftix  revenue  stamps,  244. 
alterations,  2-Hi,  248. 
forgery,  240-254. 
personal  defenses,  260. 
fraud,  202. 
duress,  208. 

want  or  failure  of  consideration,  270,  2761 
illegality  of  consideration,  234,  283. 
statutory  prohibition,  234,  283. 

violation  of  the  Sunday  laws,  2861 
other  statutes,  287. 
common-law  prohibition.  288. 
contravention  of  public  policy,  289, 
in  general,  289. 
restraint  of  trade,  290. 
effect  of  illegality,  291. 

illegality  as  being  total  or  partial,  291. 
knowledge  of  illegality,  intention,  292, 
discharge  of  instrument,  294. 
payment,  295. 
payment  or  purchase,  299. 
payment  supra  protest,  300. 
discharge  by  act  of  holder,  302. 
renunciation,  302. 
cancellation,  302. 
discharge  by  operation  of  law,  303. 
discharge  of  parties  secondarily  liable,  3^. 
summary  of  real  and  personal  defenses,  SOS. 

DEFINITIONS, 

acceptance,  24,  78. 
acceptor,  23. 

accommodation  parties,  176, 
bill  of  exchange,  22. 

foreign  bill,  22. 

inland  bill,  22. 
custom  of  merchants  or  law  merchant,  2. 
check,  404. 
days  of  grace,  75. 
dishonor,  340. 


INDEX.  636 

ITb*  figures  refer  to  pages.] 

DEFINITIONS— Cont'd, 
draft,  24. 
drawer,  23. 
drawee,  23. 
holder,  of  biU.  23. 

of  note,  26. 
Immediate  parties,  1921 
Indorsement,  105. 
indorser,  of  bill,  23. 

of  note,  26. 
indorsee,  of  bill,  24» 

of  note,  26. 
maker,  26. 
money,  43. 
payee,  of  bill,  23. 

of  note,  26. 

promissory  note,  25. 

remote  parties,  192. 

value  received,  73. 

DELIVERY, 

of  bill  or  note,  67. 
escrow,  67. 
npon  condition,  71. 
of  acceptance,  88. 
of  indorsement,  130. 
transfer  by,  204. 

see  "lYansfer." 
DEMAND, 

instrument  payable  on,  32,  40. 

when  demand  to  be  made,  40. 

when  to  be  presented,  337,  343-34a 

DESTRUCTION  OF  BILL, 
whether  an  acceptance,  94. 

DISCHARGE  OF  INSTRUMENT, 
as  a  defense,  200,  294. 
payment,  294,  295. 
by  act  of  holder,  302. 
by  operation  of  law,  303. 
discharge  of  parties  secondarily  liable,  304. 

DISCOUNT, 

of  bill  by  drawee  before  acceptance,  79. 
DISHONOR, 

see  "Notice  of  Dishonor." 
DIVEIRSION, 

of  accommodation  paper,  180, 
DONATIO  MORTIS  CAUSA, 

see  "Gift' 


536 


DRAPT, 

deQoed.  24. 


INDEX, 
[The  figures  refer  to  pagea.] 


DRAWEE, 

of  bill,  definea,  23. 

designation  of,  57. 

relation  to  bill  before  acceptance,  79. 

discx)uut  of  bill  by  drawee  before  acceptance,  78. 

relation  of,  to  bill  after  acceptance,  79. 

existence  of,  undertaking  of  drawer,  159. 

capacity  to  accept,  estoppel  of  drawer  to  deny,  159. 

DRAWEK, 

of  bill,  defined.  23. 

signature  of.  54,  55. 

rights  and  liabilities,  before  acceptance,  79. 

after  acceptance,  80. 
liability  of,  156. 
undertaking  of  drawer,  159. 

existence  of  drawee,  159. 

capacity  of  drawee  to  accept,   159. 

tbat  the  drawee  will  accept,  159. 
discharge  from  liability  by  acts  or  neglect  of  holder,  304. 
existence  of,  admission  by  acceptor,  146. 
signature  of,  admission  by  acceptor,  146. 
autuorltj  to  draw,  admission  by  acceptor,  146L 
capacit"  of,  admission  by  acceptor,  146. 
accoumiodation  drawer,  see  "Accommodation." 
damages  against,  160,  170. 

capacity  of.  warranty  by,  or  estoppel  of,  Indorser,  162. 
by  what  law  contract  determined,  183. 
payrapnt  by,  not  a  discharge,  297. 
presentment  for  acceptance  or  payment,  to  charge  drawer,  336L 

see  "Presentment." 
notice  of  dishonor,  to  charge  drawer,  336. 

see  "Notice  of  Dishonor." 

DRUNKENNESS, 

as  a  defense,  218,  226. 

Instruments  executed  by  drunken  persons.  226. 

Indorsement  and  transfer  by  drunken  persons,  22fl. 

DUEBILL, 

not  a  note,  29,  31. 

DURESS, 

as  a  defense,  268. 


EQUITABLE  ASSIGNMENT, 
see  "Assignment." 


INDEX.  537 

[The  fl£:ureB  refer  to  pages.] 
EQUITY, 

equitable  assignment  10. 

relief  against  inadyertent  failure  to  indorse,  200,  202. 

EQUITIES, 

title  of  bona  fide  bolder  for  value  not  subject  to,  12L 

see  "Defenses." 
assignee  of  nonnegotiable  instrument  takes  subject  to,  13,  lOT. 

see  "Defenses." 
effect  of  failure  to  indorse,  200. 
transfer  of  overdue  paper  subject  to,  207. 

ESCROW, 

delivery  in,  67. 
ESTOPPEL, 

facts  which  acceptor  admits,  146. 

genuineness  of  drawer's  signature,  14flL 

existence  of  drawer,  146. 

capacity  of  drawer,  146. 

authority  to  make  draft,  146. 

competency  of  payee  to  indorse,  146. 
facts  which  acceptor  does  not  admit,  151. 

genuineness  of  payee's  or  subsequent  indorsements,  151. 

genuineness  of  terms  contained  in  bill,  151. 
undertaking  or  estoppel  of  drawer,  159. 

existence  of  drawee,  159. 

capacity  of  drawee  to  accept,  159. 

that  the  drawee  will  accept,  159. 
facts  which  the  indorser  is  estopped  to  deny,  162. 

genuineness  of  instrument,  162. 

that  the  instrument  is  a  valid  and  subsisting  obligation,  162. 

that  the  obligations  of  all  prior  parties  are  valid,  162. 

capacity  of  prior  parties,  162. 

that  he,  as  indorser,  has  title,  and  the  right  to  transfer,  162. 
facts  which  the  indorser  without  recourse  is  estopped  to  deuy.  167. 
facts  which  the  transferror  by  delivery  is  estopped  to  deny,  167. 
by  negligence  facilitating  alteration,  253. 

EXCHANGE, 

stipulation  for,  does  not  Invalidate  bill  or  note,  42,  52, 
see  "Damages." 

EXECUTORS  AXD  ADMINISTRATORS, 
power  to  transfer  instrument,  63. 
whether  they  incur  liability,  63. 
transfer  to,  on  death  of  holder,  198. 
presentment  to,  on  death  of  maker  or  acceptor,  364. 
notice  of  dishonor  to,  on  death  of  party  to  be  notified,  383. 

EXEilPTIONS. 

waiver  of,  in  bill  or  note,  effect.  50. 


538  INDEX. 

CTlie  figures  refer  to  pagM.1 

EXPHXSES, 

see  "Damages.'* 


FAILURE  OF  CONSIDERATION, 
see  "Consideration." 

FEES. 

notarial  fees,  see  "Damages.** 

FEME  COVERT, 

see  "Married  Women." 

FICTITIOUS  PAYEE, 

Instrument  payable  to,  efTect,  54,  61. 

FOREIGN  BILL, 

see  "Bill  of  Exchange";   "Protest," 

FOREIGN  LAW, 

see  "Conflict  of  Laws." 

FORGERY, 

as  a  defense,  246,  254. 

estoppel  of,  or  warranty  by,  Indorser,  162. 

of  bill  in  respect  of  terms,  acceptor  not  estopped,  161. 

of  Indorsements,  estoppel  of  acceptor,  151. 

of  drawer's  signature,  admission  by  acceptor,  146. 

tORM, 

of  bill  of  exchange,  22. 
of  promissory  note,  26. 
indicia  of  negotiability,  14. 

see  "Bill  of  Exchange";   "Check";   "Promissory  Note.' 

FRAUD, 

as  a  defense,  262. 

FRAUDS,  STATUTE  OF, 

parol  acceptance  or  promise  to  accept,  89,  91,  lOL 


G 

GAMING, 

note  given  for  gaming  consideration,  334,  note  56. 
GIFT, 

of  donor's  note,  invalid  as  gift  inter  vivos  or  donatio  mortis  causa,  278, 
note,  211. 

of  note  of  third  person,  278,  note  211, 
GRACE, 

see  "Days  of  Grace." 

GUARANTY, 

whether  writing  an  indorsement  or  guaranty,  109,  132. 


INDEX.  639 

tThe  figures  refer  to  pages.] 

GUARDIANS. 

power  to  transfer  Instrument,  63. 
whether  they  Incur  liability,  63. 

H 

HOLDER, 

of  note,  defined,  26. 
of  bill,  defined,  23. 

HOLDER  IN  DUE  COURSE, 

see  "Purchaser  for  Value  without  Notice." 

HONOR, 

acceptance  for  honor,  101. 

payment  for  honor,  300. 
HUSBAND  AND  WIFE, 

see  "Married  Women.** 

I 

ILLEGAL  AGREEMENTS, 

illegality  as  a  defense,  234,  283. 
by  what  law  validity  determined,  183. 
see  "Consideration." 

IMPLIED  ACCEPTANCE, 
Bee  "Acceptance." 

INDICIA, 

of  negotiability,  14. 

see  "Bill  of  Exchange";   'Tromlssory  Note.** 

INDORSEE, 

of  bill  or  note,  defined,  24-26. 

see  "Indorsement";    "Purchaser  for  Value  without  Notice.** 

INDORSER, 

of  bill  or  note,  defined,  23,  26. 

damages  against,  170. 

accommodation  indorser,  see  "Accommodation.** 

capacity  of,  warranty  by  or  estoppel  of  subsequent  Indorser,  162. 

liability  of,  156,  162. 

see  "Indorsement." 
by  what  law  contract  of  determined,  183. 
payment  by,  not  a  discharge,  297. 
discharge  of,  304. 
presentment  for  acceptance  or  payment,  to  charge  indorser,  830. 

see  "Presentment." 
notice  of  dishonor,  to  charge  drawer,  336k 

see  "Notice  of  Dishonor." 

INDORSEMENT, 
deflned,  105. 
formal  requisites,  105. 


540  INDEX- 

[Tbe  figures  refer  to  pages.] 

INDORSEMENT— Cont'd. 

indorsement  or  assignment,  lOS. 

indorsement  or  guaranty,  109,  132. 

In  blank,  110. 

writing  contract  over  indorsement  in  blank,  112. 

Indorsement  written  on  blank  bill  or  note,  112,  113. 

parol  evidence,  whether  admissible  to  vary  blank  indorsement,  114. 

special  or  in  full,  116. 

instrument  originally  payable  to  bearer,  116. 
combination  of  indorsements  in  full  and  In  blank,  11& 
without  recourse,  119,  120. 
conditional  indorsement,  119,  121. 
restrictive  indorsement,  119,  124. 
nature  of  indorsement,  128i. 

as  a  contract,  128. 

as  a  transfer,  128,  130. 
requisites  of  Indorsement,  131. 

following  tenor  of  instrument,  13L 

who  may  indorse,  133. 

Instrument  payable  to  "cashier,"  133,  note  96. 

necessity  for  delivery,  136. 
anomalous  or  irregular  indorsements,  138. 

by  person  whose  name  does  not  otherwise  appear,  138. 

Indorsement  before  indorsement  and  transfer  by  payee,  138L 

In  name  of  partnership,  notice,  322. 
title  of  Indorsee,  12. 
not  subject  to  equities  between  original  parties,  13.. 

see  "Defenses." 
forgery  of  indorsement,  246,  254. 
occommodatlon  Indorser,  see  "Accommodation.** 
liability  of  indorser,  156. 
warranties  or  facts  which  indorser  is  estopped  to  deny,  162. 

genuineness  of  instrument,  162. 

that  the  Instrument  is  a  valid  and  subsisting  obligation,  162. 

that  the  obligations  of  all  prior  parties  are  valid,  162. 

capacity  of  prior  parties,  162. 

that  he,  as  Indorser,  has  title  and  the  right  to  transfer,  162. 

Indorser  without  recourse,  169. 
damages  against  indorser,  170. 
genuineness  of,  no  admission  by  acceptor,  151. 
discharge  of  Indorser,  304. 
payment  to  another  than  the  holder,  13. 
competency  of  payee  to  Indorse,  admission  by  acceptor,  14GL 
necessity  for,  to  transfer  instrument,  200. 
effect  of  failure  to  indorse  by  mistake  or  otherwise,  200. 
effect  of,  by  what  law  determined,  183,  187. 


INDEX.  541 

[The  figures  refer  to  pages.] 

INFANCY, 

as  a  defense,  220. 

instruments  executed  by  Infants,  63,  218. 

indorsement  and  transfer  by  infant,  218. 

INLAND  BILL, 

see  "Bill  of  Exchange." 

INNOCENT  HOLDER, 

see  "Purchaser  for  Value  without  Notice* 

INSANITY, 

see  "Lunacy." 

INSTALLMENTS, 

Instrument  payable  in,  32,  41, 

INTEREST, 

reservation  of,  does  not  invalidate  bill  or  note,  42,  52. 
payable  as  damages,  rate  of,  by  what  law  determined,  188L 
taken  in  advance  on  face  value  of  paper,  not  usurious,  23d. 
compoundiDg,  whether  usurious,  240. 
see  "Usury." 

INTOXICATION, 

see  "Drunkenness.** 

I  O  U, 

not  a  note,  29.  31. 

IRREGULAR  INDORSEMENT, 
see  "Indorsement" 

1 

JUDGMENT. 

power  In  note  to  confess,  effect,  50. 


KNOWLEDGE, 
see  "Notice." 


LARCENY, 

see  "Stolen  Instrument." 

LAW  MERCHANT, 

defined  and  explained,  2. 

LEGAL  TENDER, 

how  determined,  43. 

LEX  FORI, 

when  governs,  183,  184,  190. 
see  "CoafUct  of  Law*." 


542  INDEX. 

[Th«  flgurei  refer  to  pagea.] 

LEX  LOCI  CONTRACTUS, 
when  govorus,  183. 

see  "Conflict  of  Laws." 

LEX  LOCI  SOLUTIONIS, 
when  governs,  183. 

see  "Conflict  of  Laws." 

LOST  INSTRUMENT, 

rights  of  bona  tide  holder.  111. 

LUNACY, 

as  a  defense,  226. 

Instruments  executed  by  persons  non  compos  mentis,  63,  218,  226. 

Indorsement  and  tiansfer  by  person  non  compos  mentis,  63,  218,  220L 

M 

MAKER. 

of  note,  defined,  26. 

signature  of,  54,  55. 

liability  of.  144. 

damages  against,  170. 

capacity  of.  warranty  by,  or  estoppel  of  Indorser,  162. 

contract  of,  by  what  law  determined,  183. 

accommodation  maker,  see  "Accommodation." 

MARRIED  WOMEN, 

marriage  of  holder,  rights  of  husband,  198. 
transfer  to  married  woman,  rights  of  husband,  198w 
coverture  as  a  defense,  218,  221. 
Instruments  executed  by.  63.  218.  221. 
Indorsement  and  transfer  by,  63,  218,  221. 

MEASURE  OF  DAMAGES, 
see  "Damages." 

MEDIUM  OF  PAYMENT, 
in  general,  42. 

MEMORANDUM  CHECKS, 
In  general,  407. 

MERCHANTS. 

see  "Custom  of  Merchants.** 

MONEY. 

defined.  43. 

instrument  must  be  payable  In,  42-47. 
MONTHS. 

how  reckoned,  76. 

N 

NEGLIGENCE, 

facilitating  alteration  of  Instrument,  253. 


INDBX.  643 

[The  figures  refer  to  pages.] 

NEGOTIABILITY, 

origin  of,  1-8. 
purpose  of,  17,  18. 
indicia  of,  14^17. 

see  "Bill  of  Exchange";    "Promissory  Note.** 
distinguished  from  assignability,  9-14. 

see  "Assignment";   "Indorsement";   "Transfer." 
the  statute  of  Anne,  2,  4. 

construction  of,  5. 
other  statutes  regulating,  15. 
by  what  law  determined,  183,  186. 
the  custom  of  merchants,  or  law  merchant,  defined  and  explained,  2. 

see  "Bill  of  Exchange";  "Checks";  "Defenses";  "Indorsement";  "Pm- 
chaser  for  Value  without  Notice";    "Transfer." 
NEGOTIABLE  INSTRUMENTS, 

see  "Bill  of  Exchange";    "Check";    "Promissory  Note.'^ 
NEGOTIABLE  INSTRUMENTS  LAW, 
history,  430. 

in  what  states  adopted,  432^ 
text,  433-489. 
NEGOTIATION, 
see  "Transfer.** 

NOTARY  PUBLIC, 

may  make  presentment,  361. 

certificate  of  protest,  302. 

fees,  when  an  item  of  damages,  170,  172,  173. 

whether  presentment  by  clerk  sufficient  foundation  for  protest,  362,  note  •. 
NON  COMPOS  MENTIS, 

see  "Drunkenness";    "Lunacy." 
NON-NEGOTIABLE  INSTRUMENTS, 

distinguished  from  negotiable  instruments,  1,  5-8. 

assignment  of,  9-14. 

see  "Assignment." 
distinguished  from  negotiation,  9-14. 

presumption  of  consideration,  5-7. 
NON-NEGOTIABLE  NOTES, 

within  statute  of  Anne,  6. 

whether  consideration  presumed,  6. 

distinguished  from  negotiable  notes,  7. 
NOTE, 

see  "Promissory  Note." 
NOTICE, 

of  assignment  of  non-negotiable  instrument,  IL 

of  equities,  317. 

actual  notice.  317,  319. 
constructive  notice,  317,  321. 

see  "Purchaser  for  Value  without  Notice."* 


£44  INDEX. 

[The  figures  refer  to  page*.] 

NOTICE  OF  DISHONOR, 
an  implied  couditiou,  32. 
necessity  for,  3315,  3G7. 
detiued,  372. 

bow.  wbeu,  and  where  it  must  be  given,  372. 
■utticieuoy  of  notice,  373. 
Ideutitlcution  of  instrument,  374. 
Btateuu'Ut  of  pieseutmeut,  etc.,  376. 
Ly  whum  notice  should  be  given,  379. 
to  whose  beuetit  notice  accrues,  381. 
to  whom  notice  should  be  given,  383. 
method  of  giving  notice,  384. 
time  of  giving  notice,  390. 

effect  of  failure  to  give  notice  of  dishonor,  367. 
excuses  for  failure  to  give  notice,  394. 
reasonable  diligence,  397. 
waiver  of  notice,  401. 
by  what  law  determined,  402. 
of  non-paymeat  by  acceptor  supra  protest,  152. 
of  check,  412. 
not  necessary  to  charge  accommodated  indorser,  183. 

NOTARIAL  FEES, 
see  "Damages." 

NUDUM  PACTUM. 

see  "Consideration." 


OPERATION  OF  LAW, 
transfer  by,  198. 

ORDER. 

contained  in  bill,  27. 

see  "Bill  of  Exchange." 

ORDER  OF  PROOF, 
on  trial,  327. 

ORIGIN, 

of  negotiability,  1. 

OVERDUE  PAPER, 

may  be  transferred,  207. 
rights  of  transferee,  207. 

P 

PAROL  ACCEPTANCB, 

see  "Acceptance." 

PAROL  EVIDENCE, 

whether  admissible  to  vary  blank  Indorsement,  114. 


INDEX.  646 

ITbe  figures  refer  to  pages.] 

PARTIES. 

to  bill,  23. 

to  note,  26. 

specitication,  54. 

who  may  indorse,  133. 

immediate  parties,  192. 

remote  parties,  192. 

who  may  sue  on  instrument,  212 

who  may  accept  bill,  81,  86. 
see  "Acceptance." 

accommodation  parties,  see  "Accommodation.**  * 

certainty  as  to,  56. 

specification  of,  54. 

capacity  of  parties,  63. 

see  "Acceptor";  "Corporations";  "Drawee";  "Drawer";  "Drunken- 
ness"; "Holder";  "Infancy";  "Indorsee";  "Indorser";  "Lunacy"; 
"Maker";   "Married  Women";    "Payee." 

PARTNERSHIP, 

accommodation  paper  made  in  name  of,  bona  fide  purchaser,  183. 
irregular  indorsement  in  name  of,  effect  of  as  notice,  322. 
where  persons  primarily  liable  are,  presentment,  to  whom  made,  364. 
notice  of  dishonor,  to  whom  given,  383. 

PAYEE, 

of  bill,  defined,  23. 

of  note,  defined,  26. 

designation  of,  54,  59. 

payable  to  order  of  maker  or  drawer,  54,  61. 

payable  to  fictitious  person,  54,  61. 

competency  to  indorse,  admission  by  acceptor,  148, 

PAYMENT, 

medium  of,  42. 

time  ot  payment,  days  of  grace,  75. 

discount  of  bill  by  drawee  before  acceptance,  79. 

by  negotiable  instrument,  effect,  19-21. 

when  a  discharge  and  defense,  12,  260,  294,  295. 

payment  or  purchase,  299. 

payment  supra  protest  or  for  honor,  300. 
of  non-negotiable  instrument  to  assignor,  rights  of  assignee,  10-13. 
by  accommodated  party  a  discharge,  183. 
time  of,  by  what  law  governed,  186. 
of  forged  instrument,  recovery  by  payor,  256 

see  "Presentment." 

PAYMENT  FOR  HONOR, 

see  "Payment  Supra  Protest** 

PAYMENT  SUPRA  PROTEST, 
see  "Payment." 
NEG.BILLS.-35 


546  INDEX. 

[Th«  flsrures  refer  to  pages.] 

PERSONAL  DEFENSES, 
see  "Defenses." 

PERSONAL  REPRESENTATIVES, 

see  "Executors  and  Administrators.** 

PLEADING, 

In  action  on  bill  or  note,  328,  note  57. 

PLEDGE. 

see  "Collateral  Security." 

PRE-EXISTING  DEBT. 

see  "Antecedent  Debt" 
PRESENTMENT, 

an  implied  condition,  32. 

necessity  for,  336. 

purposes  of,  337. 

mauner  of,  337,  338. 

time  of,  40,  337.  344. 

days  of  grace,  75. 

place  of,  337,  338,  353. 

by  whom  and  to  whom,  360-362. 

effect  of  failure  to  present,  300,  364, 

excuses  for  failure  to  present,  394. 

reasonable  diligence,  307. 

waiver  of  presentment,  40L 

by  what  law  determined,  402. 

to  acceptor  supra  protest,  152. 

to  drawee  to  fix  liability  of  acceptor  supra  protest,  152. 

for  payment,  not  necessary  to  charge  accommodated  indorser,  183. 

of  check,  412. 

PRE  SUM  PIT  ON, 

of  consideration  for  non-negotlable  instrument,  5-7. 

of  title  in  holder,  12. 

as  to  payment  by  bill  or  note,  whether  absolute  or  conditional,  19-21. 

as  to  whether  party  is  a  purchaser  for  value  without  notice,  327. 

PRINCIPAL  AND   AGENT, 

power  of  agent  to  transfer  instrument,  65, 

■whether  he  incurs  liability,  65. 

undisclosed  principal,  65. 
PROMISE, 

contained  In  note,  29. 

see  "Promissory  Note.** 

PROMISSORY   NOTE, 
defined,  25. 
the  statute  of  Anne,  2,  4. 

construction  of,  5. 
non-negotiable  note,  5-7. 
payment  by,  19-21. 


INDEX.  647 

[The  fig:ures  refer  to  pages.] 

PROMISSORY  NOTE— Cont'd, 
parties  to  note,  26. 
origin  of  negotiability  of,  1. 
form,  26. 

negotiability  not  necessary  to  form  or  substance  of,  I. 
essentials  of  note,  in  general,  20. 
indicia  of  negotiability,  14. 
days  of  grace,  75. 
delivery,  67. 

in  escrow,  67. 

upon  condition,  71. 
date,  72,  73. 
place  of  date,  27. 
the  promise  contained  in  note,  29. 

certainty  as  to  terms,  31. 

uncertainty  as  to  event,  31,  33. 

uncertainty  as  to  time,  31,  35. 

payment  out  of  particular  fund,  32,  37. 

additional  condition  or  agreement  not  of  essence  of  promise,  42,  48. 

giving  holder  option  of  payment  in  money  or  some  other  thing,  42,  50. 

payable  on  demand  or  at  sight,  etc.,  32,  40. 

no  time  of  payment  expressed,  32,  41. 

payable  in  installments,  32,  41, 

must  be  for  payment  of  money  only,  42. 

payment  in  property  other  than  money,  42,  50. 
option  given  holder,  42,  50. 

performance  of  other  acts  in  addition  to  payment  of  money,  42,  48. 

definition  of  money,  43. 

amount  must  be  certain,  42,  52. 
interest,  42,  52. 
exchange,  42,  52. 

payable  in  foreign  money,  46. 
specification  of  parties,  54. 

signature  of  maker,  54,  55. 

certainty  as  to  parties,  56. 

designation  of  payee,  54,  59. 

payable  to  order  of  maimer.  54,  61. 
payable  to  fictitious  person,  54,  61, 
necessity  for  and  meaning  of  "value  received,"  73. 
accommodation  parties,  see  "Accommodation." 
liability  of  maker,  144. 

see  "Maker." 
liability  of  indorser,  see  "Indorsement." 

PROTEST, 

an  Implied  condition,  32. 

necessity  for,  effect  of  failure  to  protest,  360,  368. 

acceptance  supra  protest,  101. 

In  order  to  hold  acceptor  supra  protest,  152. 


648  INDEX, 

[The  figures  refer  to  pages.] 

PROTEST— Cont'd. 

on  uon-iia.vmont  by  acceptor  supra  protest,  152. 

fees,  when  au  item  of  damages,  170,  172,  173. 

waiver  of,  4U1. 

by  wliat  law  determined,  402. 

of  cbt'cli,  412. 

PUBLIC  rOLICY, 

agreements  in  contravention  of,  2S9. 

PURCHASER  FOR  VALUE  WITHOUT  NOTICE, 
what  constitutes,  309. 
Talue,  what  is,  310. 

wlietber  antecedent  or  pre-existing  debt  Is  value,  310. 
transfer  as  collateral  security,  whether  for  value,  310. 
where  purchaser  pays  less  than  face,  amount  of  recovery,  316 
notice,  317 

actual  notice,  317.  319. 
constructive  notice,  317,  321. 
bona  tides,  or  good  faith,  323. 
when  notice  must  exist,  325. 

notice  immaterial  if  transferror  a  purchaser  for  value  without  notice,  325. 
overdue  paptr,  207. 

presumption  and  burden  of  proof,  and  order  of  proof,  327. 
defenses  as  against,  216. 

defenses  as  real  or  personal,  21S. 
real  delenses,  218. 
personal  defenses,  260. 
coverture,  221. 
Infancy,  218. 

corporations,  ultra  vires,  222. 
persons  non  compos  mentis,  226. 
dninken  persons,  226. 
Statutes  avoiding  instrument,  234. 
usury,  236. 

failure  to  stamp,  244. 
alterations.  246,  248. 
forgery,  246,  254. 
common  personal  defenses,  260. 
fraud,  262. 
duress,  2(;8. 

want  or  failure  of  consideration,  270,  276. 
Illegality  of  consideration,  234,  283. 
statutory  prohibition,  234,  283. 

violation  of  the  Sunday  laws,  286. 
other  statutes,  287. 
common-law  prohibition,  288. 
contravention  of  public  policy,  289. 
in  general,  289. 
restraint  of  trade,  290. 


INDEX.  549 

[The  figures  refer  to  pages.] 

PUECHASER  FOR  VALUE  WITHOUT  NOTICE— Cont'd, 
effect  of  illegality,  291. 

illegality  as  being  total  or  partial,  291. 
knowledge  of  illegality,  intention,  292. 
discharge  of  the  instrument,  294. 
payment,  295. 

discharge  by  act  of  holder,  302. 
discharge  by  operation  of  law,  303. 
discharge  of  parties  secondarily  liable,  304. 
stolen  instruments.  111. 
lost  instruments,  112, 

PURPOSE, 

of  negotiability,  17. 

Q 

QUALIFIED  ACCEPTANCE, 
in  general,  82,  84. 

see  "Acceptance." 
QUALIFIED  INDORSEMENT, 

identical  with  indorsement  without  recourse,  119. 
see  "Indorsement." 


REAL  DEFENSES, 
see  "Defenses." 

RE-EXCHANGE, 

when  an  item  of  damages,  170. 
damages  payable  in  lieu  of,  171. 
by  what  law  determined,  189. 
see  "Damages." 

RELEASE, 

discharge  of  Instrument  by,  302, 
when  a  personal  defense,  260. 

REMEDY, 

what  law  determines,  190. 

RENUNCIATION, 

discharge  of  instrument  by,  302. 
when  a  personal  defense,  2G0. 

RESTRAINT  OF  TRADE, 
agreement  In,  290. 

RESTRICTIVE  INDORSEMENT, 
In  general,  119,  124. 
as  notice,  322. 

see  "Indorsement";   "Purchaser  for  Value  without  Notice.' 

RETTENTION, 

of  bill,  whether  an  acceptance,  04. 


550  INDEX. 

[The  figures  refer  to  pages.] 

s 

SATISFACTION, 

see  "Discbarge  of  Instrument" 

SET-OFF, 

paper  transferred  after  maturity,  not  subject  to,  207,  note  53. 
see  "Defenses." 

SIGHT, 

instrument  payable  at,  32.  40. 

wben  to  be  presented,  337,  343-348. 
effect  of  failure  to  present,  3U4. 

SIGNATURE, 

sutticieucy,  54,  55. 

of  Indorser,  108. 

of  drawer,  admission  by  acceptor,  146. 

SPECIAL  INDORSEMENT, 

identical  with  indorsement  In  full,  118, 
see  "Indorsement" 

STAMPS, 

failure  to  affix  revenue  stamps,  effect,  244, 
"War  Revenue  Act,"  245. 

STATUTE  OF  ANNE, 

establishing  negotiability  of  notes, 
text  of,  4. 
construction,  5. 

STATUTE  OF  FRAUDS, 

parol  acceptance  or  promise  to  accept,  89,  91,  99. 

STATUTE  OF  LIMITATIONS, 
by  what  law  determined,  190. 

STATUTES, 

Btatutoiy  avoidance  of  instrument,  234. 

see  "Defenses";   "Purchaser  for  Value  Without  Notice.** 

STOLEN  instrument:, 

transfer  of,  12. 

rights  of  bona  fide  holaer.  111. 

SUNDAY, 

violation  of  the  Sunday  laws,  286. 

SUPRA  PROTEST, 

acceptance  supra  protest,  101. 
payment  supra  protest,  300. 

SURETIES, 

discharge  of  drawer  or  indorser.  304. 
SURVIVORSHIP, 

of  joint  payee  or  Indorsee,  198. 


INDEX.  551 

[The  figures  refer  to  pages.] 

T 

TENDER, 

readiness  of  debtor  at  place  of  payment,  when  equivalent  to  tender,  867. 
TENOR, 

of  bill.  81,  82. 

indorsement  must  follow,  131. 
TIME, 

of  payment,  days  of  grace,  75. 
TITLE, 

of  indorsee  or  holder,  see  "Indorsement";  "Transfer.** 
presumed  to  be  in  holder,  12. 
warranty  of,  by  indorser,  162. 
TRADE,  RESTRAINT  OF, 

unlawful  agreements,  290. 
TRANSFER, 

indorsement  as  a  transfer,  125,  128. 
effect  of  indorsement  as,  by  what  law  determined,  187. 
in  general,  191-215. 
defined,  191. 

validity  as  between  immediate  parties,  192. 
methods  of  transfer,  196. 
by  assignment,  196. 

rights  of  assignee,  197. 
by  operation  of  law,  198. 
death  of  holder,  198, 
bankruptcy  of  holder,  198. 
marriage  of  feme  sole,  198. 
husband  and  wife,  198. 
death  of  joint  payee  or  indorsee,  198. 
by  negotiation,  200. 

negotiation  by  indorsement,  200. 
negotiation  by  delivery,  204. 
overdue  paper,  207. 

rights  of  transferee,  207. 
of  nonnegotiable  instrument,  see  "Assignment." 
of  lost  instrument,  112. 
of  stolen  instrument,  12,  111. 
title  of  holder,  12. 
presumption  of  title  in  holder,  12, 
not  subject  to  equities  between  original  parties,  13L 

TRANSFER  BY  DELIVERY, 

negotiation  by.  2()4. 
see  "Transfer." 

TRANSFERROR  BY  DELIVERY, 
warranties  of,  107. 
see  "Warranties." 


552  INDEX. 

[The  figures  refer  to  pages.] 

TRUSTEES, 

power  to  transfer  Instrument,  63. 
wbL'ther  they  incur  liability,  G3. 

u 

tJLTRA  VIUKS. 

st'e  "Corporations." 

iJNDISCLOSED  PRINCIPAL, 
see  "Principal  and  Agent** 

UNLAWFUL  AGREEMENTS, 
in  general,  234,  283. 

see  "Consideration." 

UNCERTAINTY, 
as  to  parties,  54. 
as  to  amount  to  be  paid,  42. 
as  to  order  in  bill  or  promise  in  note,  31. 

U3UAL  COURSE  OF  BUSINESS, 

meaning  of  term,  324. 

see  "Purchaser  for  Value  without  Notice.**- 
USURY, 

as  a  defense,  236. 

by  what  law  determined,  183,  185^ 


V 

VALUE, 

what  constitutes,  310. 

see  "Purchaser  for  Value  without  Notice.'* 
VALUE  RECEIVED, 

necessity  for  and  meaning  of  expression,  73, 

VERBAL  ACCEPTANCE, 
see  "Acceptance." 

w 

WAIVER, 

of  exemptions,  in  bill  or  note,  effect,  50. 

of  presentment,  protest,  and  notice  of  dishonor,  394,  401. 

WAR   REVENUE  ACT. 
see  "Stamps." 

WARRANTIES, 

by  acceptor,  146. 

genuineness  of  drawer's  signature,  146. 

existence  of  drawer,  14(>. 
capacity  of  drawer,  14G. 


INDEX.  553 

(The  figures  refer  to  pace*.] 

WARRANTIES— Cont'd. 

autbority  to  make  draft,  146. 

payee's  competency  to  indorse,  146. 
facts  which  acceptor  does  not  admit,  151, 

genuineness  of  payee's  and  subsequent  indorsements,  151. 

genuineness  of  terms  contained  in  bill,  15Lr 
by  drawer,  159. 

existence  of  drawee,  159. 

capacity  of  drawee  to  accept,  159. 

that  the  drawee  will  accept,  159. 
by  Indorser,  102. 

genuineness  of  instrument,  162. 

that  the  instrument  is  a  valid  and  gubslstlng  obligation,  162. 

that  the  obligations  of  all  prior  parties  are  valid,  162. 

capacity  of  prior  parties,  162. 

that  he,  as  indorser,  has  title,  and  the  right  to  transfer,  162. 
by  Indorser  without  recourse,  167. 
by  transferror  by  delivery,  167. 
damages  for  breach,  170. 

WITHOUT  RECOURSE, 
see  "Indorsement." 


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I  <i."i."jS> 


Barroips  on  Hcoilt^cnce. 

1S99.     034  pages.     ,$3.75  tlolivcrod. 
By  MORTON  BARROWS,  A.  B.,  LL.  B. 


TABLE   OF   CONTENTS. 

Chap. 

1.  Definition  and  Essential  Elements. 

2.  Contributory  Negligence. 

3.  Liability  of  Master  to  Servant. 

4.  Liability  of  Master  to  Third  Persons. 

5.  Common  Carriers  of  Passengers. 
G.  Carriers  of  Goods. 

7.  Occupation  and  I'se  of  Land  and  Water. 

8.  Dangerous  Instrumentalities. 

9.  Negligence  of  Attorneys,  Physicians,  and  Public  Officers. 

10.  Death  by  Wrongful  Act. 

11.  Negligence  of  Municipal  Corporations. 


CGo.J9-l 


Black  on  Construction  anb 
3nterpretation  of  taws, 

1896.     509  pages.     $3.75  delivered. 

By  H.  CAMPBELL  BLACK, 

Author  of  Black's  Law  Dictionary,  and  Treatises  on  Constitution- 
al Law,  Judgments,  etc. 


TABLE    OF   CONTENTS. 

Chap. 

1.  Nature  and  Office  of  Interpretation. 

2.  Construction  of  Constitutions. 

3.  General  Principles  of  Statutory  Construction. 

4.  Statutory  Construction ;    Presumptions. 

5.  Statutory  Construction ;    Words  and  I'lirases. 
0.  Intrinsic  Aids  in  Statutory  Cdustruction. 

7.  Extrinsic  Aids  in  Statutory  Construction. 

S.  Interpretation  with  Reference  to  Common  Law. 

9.  Retrospective  Interpretation. 

10.  Construction  of  Provisos,  Exceptions,  and  Saving  Clauses. 

11.  Strict  and  Liberal  Construction. 

12.  Mandatory  and  Directory  Provisions. 

13.  Amendatory  and  Amended  Acts. 

14.  Construction  of  Codes  and  Revised  Statutes. 

15.  Declaratory  Statutes. 

1(5.  The  Rule  of  Stare  Decisis  as  Applied  to  Statutory  Construe 

tion. 
17.   IntcrjirctatioM  of  Judicial  Decisions  and  the  1  )n(i  linc  uf  i'lcc 

cdcnts. 


Black's  Constitutional  taw. 

1S!)7.     710  iJases.     $3.75  dolivored. 

By  H.  CAMPBELL  BLACK, 

Autbnr  of  Black's  Law  Dictionary,  Treatises  ou  Judgments,  Tax 
Titles,  etc. 

Second  Edition. 


TABLE    OF    CONTENTS. 

Chap. 

1.  Definitions  and  General  Principles. 

2.  Tlie  United  States  and  tlie  States. 

3.  Establisbuient  and  Amendment  of  Constitutions, 

4.  Construction  and  Interpretation  of  Constitutions. 

5.  Tlie  Three  Departments  of  Government. 
G.  The  Federal  Executive. 

7.  Federal  Jurisdiction. 

8.  The  Powers  of  Congress. 

9.  Interstate  Law. 

10.  Republican  Government  Guarantied. 

11.  Executive  Power  in  the  States. 

12.  Judicial  Powers  in  the  States. 

13.  Legislative  Power  in  the  States. 

14.  The  Police  Power. 

17j.  The  Power  of  Taxation. 

IG.  The  Right  of  Eminent  Domain. 

17.  Municipal  Corporations. 

15.  Civil  Rights,  and  Their  Protection  by  the  Constitution. 

19.  Political  and  Public  Rights. 

20.  Constitutional  Guaranties  in  Criminal   Cases. 

21.  Laws  Impairing  the  Obligation  of  Contracts. 

22.  Retroactive  Laws. 


CG.559-3 


(£I?iIbs  on  Surctysl^tp  anb 
(Buaranty. 

1907.     572  pages.     $3.75  delivered. 

By  FRANK  HALL  CHILDS, 

of  the   Cbicago   Bar. 


TABLE    OF    CONTENTS. 
Cliap. 

1.  Definitions,  Parties,  Distinctions,  and  Classifications. 

2.  Formation  of  the  Contract. 

3.  The  Statute  of  Frauds. 

4.  Construction  of  the  Contract. 

5.  Rights  and  Liabilities  as  Between  the  Creditor  and  the  Sure- 

ty. 

G.  Rights  and  Liabilities  of  the  Surety  and  of  the  Briucipal  as  to 
each  other. 

7.  Rights  and  Liabilities  of  Co-Sureties  as  to  each  other. 

8.  Parties  to  Negotiable  Instruments  Occupying  the  Relatinn  of 

Sureties. 

9.  Official  Bonds. 

10.  .Judicial   Bonds. 

11.  P.ail  Bonds  and  Recognizances. 


C<i.v.;»-4 


Clark  on  Contracts. 

1904.     (>93  pages.     $3.75  delivered. 

By  WM.  L.  CLARK,  Jr. 

Second  Edition:   By  FRANCIS  B.  TIFFANY. 


TABLE    OF    CONTENTS. 


Chap. 

1.  Contract  in  General. 

2.  Offer  and  Acceptance. 

3.  Classification  of  Contracts. 

4.  Requirement  of  Writing. 
0.  Consideration. 

G.  Capacity  of  Parties. 

7.  Reality  of  Consent. 

8.  Legality  of  Object. 

9.  Operation  of  Contract. 

10.  Interpretation  of  Contract. 

11.  Discharge  of  Contract. 
.12.  Agency. 

l.j.  Quasi  Contract. 


C6559-5 


Clark  on  Corporations. 

1907.     721  pages.    $3.75  delivered. 

By  WM.  L.  CLARK,  Jr., 

Author  of  "Criminal  Law,"  "Criminal  Procedure,"  and  "Contracts. 

Second  Edition:  By  FRANCIS  B.  TIFFANY. 


TABLE   OF   CONTENTS. 

Chap. 

1.  Of  the  Nature  of  a  Corporation. 

2.  Creation  and  Citizenship  of  Corporations. 

3.  Effect  of  Irregular  Incorporation. 

4.  Relation  between  Corporation  and  its  Promoters. 

5.  Powers  and  Liabilities  of  Corporations. 

6.  Powers  and  Liabilities  of  Corporations. 

7.  Powers  and  Liabilities  of  Corporations. 

8.  The  Corporation  and  the  State. 

9.  Dissolution  of  Corporations. 

10.  Membership  in  Cori)orations. 

11.  Membership  in  Corporations. 

12.  Membership  in  Corporations. 

13.  Management  of  Corporations — Officers  and  Agents. 

14.  Rights  and  Rcnicdics  of  Creditors. 

15.  Foreign  Corporations. 
Aiipendix. 


Clarlv's  Criminal  taw, 

1902.     517  pagos.    3'>-~"»  dolivered. 

By  WM.  L.  CLARK,  Jr., 

Author  of  a  "Handbook  of  the  Law  of  Contracts." 

Second  Edition:   By  FRANCIS  B.  TIFFANY. 


TABLE    OF   CONTENTS. 

Chap. 

1.  Definition  of  Crime. 

2.  Criminal  Law. 

3.  Classification  of  Crimes. 

4.  The  Mental  Element  in  Crime. 

5.  Persons  Capable  of  Committing  Crime. 
G.  Parties  Concerned. 

7.  The  Overt  Act. 

8.  Offenses  against  the  Person. 

9.  Offenses  against  the  Person. 

10.  Offenses  against  the  Habitation. 

11.  Offenses  against  Property. 

12.  Offenses  against  the  Public  Health,  Morals,  etc. 

13.  Offenses  against  Public  Justice  and  Authority. 

14.  Offenses  against  the  Public  Peace. 

15.  Offenses  against  the  Government. 

in.  Offenses  agahist  the  Law  of  Nations. 

IT.  Jurisdiction. 

18.  Former  Jeopardy. 


C6559-7 


(£Iark  5  Criminal  Proccbure. 

1895.     665  pages.     $3.75  delivered. 
By  WM.  L.  CLARK,  Jr., 

Author  of  a  "Handbook  of  Criminal  Law,"  and  a  "Handbook  of 

Contracts." 


TABLE   OF   CONTENTS. 

Chap. 

1.  Jurisdiction. 

2.  Apprehension  of  Persons  and  Property. 

3.  Preliminary  Examination,  Bail,  and  Commitment. 

4.  Mode  of  Accusation. 

5.  Pleading — The  Accusation. 
G.  Pleading — The  Accusation. 

7.  Pleading — The  Accusation. 

8.  Pleading — The  Accusation. 

9.  Pleading — The  Accusation. 

10.  Pleading  and  Proof. 

11.  Motion  to  (iuash, 

12.  Trial   and   Verdict. 

13.  Proceedings  after  Verdict. 

14.  Evidnice. 

15.  Habeas  Corpu.s. 

C655l>-S 


(£r05xpcll  on  (Sxecutors  anb 
CTbmtnistrators. 

1S97.     (V.1()  pases.     .$.'5.7.')  dclivcrecl. 

By  SIMON  GREENLEAF  CROSWELL, 

Author  of  "Electricity,"  "Patent  Cases,"  etc. 


TABLE    OF    CONTENTS. 

Chap. 

Part  1.— DEFINITIONS  AND  DIVISION  OF  SUBJECT. 

1.  Defiuitious  and  Division  of  subject. 

Part  2.— APPOINTMENT  AND  QUALIFICATIONS. 

2.  Appointment  in  Court. 

."!.  Place  and  Time  of  Appointment  and  Reciuisites  Therefor. 

4.  Who  may  Chiim  Appointment  as  Executox'. 

5.  Who  may  Claim  the  Right  to  Administer. 

G.  Disqualilications  for  the  Office  of  I']xecutor  or  Administrator. 

7.  Acceptance  or  Renunciation. 

8.  Proceedings  for  Appointment  of  Executoi's   and  Administra- 

tors. 
0.  Special  Kinds  of  Administrations. 
1(1.  Foreign  and  Interstate  Administration. 

11.  .Joint  f]xecutors  and  Administrators. 

12.  Administration  Bonds. 

Part  3.— POWERS  AND  DUTIES. 

1.^.  Inventory — Appraisement — Notice  of  Appointment. 

14.  Assets  of  the  Estate. 

1.").  Management  of  the  Estate. 

Ki.  Sales  and  Conveyances  of  Personal  or  Real  Assets. 

17.  Payment  of  Debts  and  Allowances — Insolvent  Estates. 

IN.  Payment  of  Legacies. 

i;>.  Distribution  of  Intestate  Estates. 

20.  Administration  Accounts. 

Part  4.— TERMINATION  OF  OFFICE. 

21.  Revocation  of  Letters — Removal — Resignation. 

Part  .5.— REMEDIES. 

22.  Actions  by  Executors  and  Administrators. 

2:;.  Actions  against  Executors  and  Administrators. 
24.  Statute  of  Limitations — Set-off. 
2.").  Evidence  and  Costs. 


CG5.J9-9 


(f  aton  on  (£quity. 

1901.     734  pages.     $3.7o  delivered. 

By  JAMES  W.  EATON, 

Editor    3d    Edition    Collier    on    Bankruptcy.    Co-Editor    American 

Bankruptcy  Reports.  Eaton  and  Greene's  Negotiable 

Instruments  Law,  etc. 


TABLE    OF    CONTENTS. 

Origin  and  History. 

General  Principles  Governing  the  Exercise  of  Equity  .JurisdictiDU. 

Maxims. 

Tenalties  and  Forfeitures. 

Priorities  and  Notice. 

Bona  Fide  Purchasers  Without  Notice. 

Equitable  Estoppel. 

Election. 

Satisfaction  and  Performance. 

Conversion  and  Reconversion. 

.\ccldent. 

Mistake. 

Fraud. 

E(iuital)le  Property. 

Implied  Trusts. 

Powers,  Duties,  and  Liabilities  of  Trustees. 

Mortgages. 

Equitable  Liens. 

•Assignments. 

Remedies  Seeking  Pecuniary  Relief. 

Specific  Performance. 

Injunction. 

I'ai-tition.   Dower,   and    I'.slablisbmciit    «pf   I'.ciuiidarlfS. 

Reformation,  Caiicrllation,  and  Cloud  on  'I'itlf. 

.\nciliary  Remedies. 


(■(i.Vt!)  10 


5cttci*  on  €quity. 

1S95.     403  pages.     ?3.7.j  dolivorod. 
By  NORMAN  FETTER. 


TABLE    OF   CONTENTS. 

Chap. 

1.  Nature  and  Definition  of  Equity. 

2.  Principles  Defining  and  Limiting  Jurisdiction. 

3.  Tbe  Maxims  of  Equity. 

4.  Tlie  Doctrines  of  Equity. 

5.  Tlie  Doctrines  of  Equity. 
I).  Tlie  Doctrines  of  Equity. 

7.  Grounds  for  Equitable  Relief. 

8.  Property  in  Equity — Trusts. 

9.  Property  in  Equity — Mortgages,  Liens,  and  Assignments. 

10.  Eijuitable  Remedies. 

11.  Equitable  Remedies. 

12.  Equitable  I{emedies. 

13.  E(iuitable  Remedies. 

14.  Reformation.  Cancellation,  and  Quieting  title. 
1~).  Ancillary  Remedies. 


CG.5.J9-11 


(Barbncr  on  IPtlls. 

1903.     72G  pages.     $3.75  delivered. 

By  GEORGE  E.  GARDNER, 

Professor  in  the  Boston  University  Law  Scliool. 


TABLE    OF   CONTENTS. 

Chap. 

1.  History  of  Wills — Introduction. 

2.  Form  of  Wills. 

3.  Nuncupative,  Holographic,  Conditional  Wills. 

4.  Agreements  to  Make  Wills,  and  Wills  Resulting  from  Agree- 

ment. 

5.  Who  may  be  a  Testator. 

G.  Restraint  upon  Power  of  Testamentary  Disposition — Who  may 
be  Beneficiaries — What  may  be  Disposed  of  by  Will. 

7.  Mistake,  Fraud,  and  Undue  Influence. 

8.  Execution  of  Wills. 

9.  Revocation  and  Republication  of  Wills. 

10.  Conflict  of  Laws. 

11.  Probate  of  Wills. 

12.  Actions  for  the  Construction  of  Wills. 

13.  Construction  of  Wills — Controlling  Principles. 

14.  Construction — Description  of  Subject-.Matter. 

15.  Coustructiou — Description  of  Beneficiary. 

10.  Construction — Nature  and  Duration  of  Interests. 

17.  Construction — Vested  anfl  Contingent  Interests — Remainders 

— Executory  Devises. 

18.  Construction — Conditions. 

19.  Construction — Testamentary  Trusts  and  Powers. 

20.  Legacies  —  General  —  S|)ecific  —  Demonstrative  —  Cumiilatlvc 

— Lapsed  and  Void  —  AbatiMiicnt  —  .Vdcmptinn  —  .ViivaiKc- 
ments. 

21.  Legacies  Charged  upon  Land  or  Other  Property. 

22.  Payment  of  the  Testator's  Debt.s. 
2.3.   Election. 

21.   Rights  of  Pienefi'larifs  Not  Previously   I)lsr\issed. 


V.I  i: 


(Bcorijc  on  Partncrsl^ip. 

1897.     GIO  pages.     $3.75  dolivcrod. 
By  WILLIAM    GEORGE. 


TABLE    OF    CONTENTS. 
Chap. 

1.  Definition  and  Establishment  of  Relation. 

2.  Kinds  of  Partnerships  and  Partners. 

.3.  Characteristic  Featnres  of  Partnerships. 

4.  Implied  Rights  and  Liabilities  Inter  Se. 

5.  Articles  of  Partnership. 

G.  Rights  and  Liabilities  as  to  Third  Persons. 

7.  Actions  Between  Partners. 

8.  Actions  Between  Partners  and  Third  Persons. 

9.  Dissolution. 

10.  Limited  Partnerships. 

11.  Joint-Stock  Companies. 


CG.j.59-13 


©lenn's  3ntcrnattonaI  £aip. 

1895.     478  pages.    $3.T.j  delivered. 

By  CAPT.  EDWIN  F.  GLENN, 
Acting  Judge  Advocate,  United  States  Army. 


TABLE    OF    CONTENTS. 

INTRODUCTION. 

Chap. 

1.  Persons  in  International  Law. 

2.  The  Commencement  of  States — Fundamental  Risbts  and  Du- 

ties. 

3.  Territorial  Property  of  a  State. 

4.  Territorial  Jurisdiction. 

5.  Jurisdiction  on  the  Iligli  Seas  and  Unoccupied  Places. 

6.  The  Agents  of  a  State  in  International  Relations. 

7.  Intervention. 

8.  Nationality. 

9.  Treaties. 

10.  Amicable  Settlement  of  Disputes. 

11.  International  Relations  in  War. 

12.  Effects  of  War— As  to  Persons. 

13.  Effects  of  War — As  to  Property. 

14.  Postliminium. 

15.  Military  Occupation. 

IG.  Means  of  Carrying  on  Hostilities. 

17.  Enemy  Character. 

18.  Non-Hostile  Relations. 

19.  Termination  of  War. 

20.  Of  Neutrality  in  rjeneral. 

21.  The  Law  of  Neutrality  hctwct  n  P.cllim'reiit  and  Neutral  States. 

22.  Contraband. 

23.  Blockade. 

24.  \  isit  and  Search,  and  Right  <tf  .\iigary. 
Appendix. 


I  (;.-,.v.i   I  I 


r^ale  on  Bailments  anb 
Carriers. 

ISO*;.  CT.',  pajit's.     $3.75  dolivored. 
By  WM.  B.  HALE. 


TABLE    OF    CONTENTS. 

Chap. 

1.  In  General. 

2.  Bailments  for  Sole  Benefit  of  Bailor. 

3.  Bailment.'^  for  Bailee's  Sole  Benefit. 

4.  Bailments  for  Mutual   Benefit — Pledges. 
."..  Bailments  for  JIutual  Benefit — Hiring. 
G.  Innlieepers. 

7.  Carriers  of  Goods. 

5.  Carriers  of  Passengers. 
0.  Actions  against  Carriers. 


C(Jo5U— l.j 


^ale  on  X)amacsC5. 

1896.     47G  pages.     ?3.7:>  delivorod. 

By  WM.  B.  HALE, 

Author  of  "Bailments  and  Carriers.' 


TABLE    OF   CONTENTS. 

Chap. 

1.  Definitions  and  General  Trinciples. 

2.  Nominal  Damages. 

3.  Compensatory  Damages. 

4.  Bonds,  Liquidated  Damages  and  Alternative  Contracts. 

5.  Interest. 
(3.  Value. 

7.  Exemplary  Damages. 

8.  rieading  and  Practice. 

0.  Breach  of  Contracts  for  Sale  of  Goods. 

10.  Damages  in  Actions  against  Carrier. 

11.  Damages  in  Actions  against  Telegraph   Compaules. 

12.  Damages  for  Death  by  Wrongful  Act. 
1.3.  Wrongs  Affecting  Real  Broperty. 

14.  Breach  of   Marriage  BromLse. 


CG.j.7.J-]t3 


^alc  on  Clorts. 

ISOr..     030  pnges.     .$3.7.".  delivorod. 

By  WM.  B.  HALE. 

Author  of  "bailments  and  Carriers,"  etc. 


TABLE    OF   CONTENTS. 
Chap. 

1.  General  Nature  of  Torts. 

2.  Variations  in  Normal  Right  to  Sue. 

.0.  Liability  for  Torts  Conunitted  by  or  with  Others. 

4.  Discharge  and  Limitation  of  Liability  for  Torts. 

5.  Remedies  for  Torts — Damages. 

G.  Wrongs  Affecting  Freedom  and  Safety  of  Person. 
7.  Injuries  in  Family  Relations. 
S.  Wrongs  Affecting  Reputation. 
[).  Malicious  Wrongs. 

10.  Wrongs  to  Possession  and  Property. 

11.  Nuisance. 

12.  Negligence. 

13.  Master  and  Servant. 


CGo5S)-17 


Hopkins  on  Heal  Property 

1S9G.     589  pages.     $3.75  aollveretl. 
By  EARL  P.  HOPKINS,  A.  B.  LL.  M. 


TABLE    OF   CONTENTS. 

Chap. 

1.  What  is  Real  Property. 

2.  Tenure  and  Seisin. 

3.  Estates  as  to  Quantity — Fee  Simple 

4.  Estates  as  to  Quantity — Estates  Tail. 

5.  Estates  as  to  Quantity — Conventional    Life   Estates. 
(>.  Estates  as  to  Quantity— Legal   Life  Estates. 

7.  Estates  as  to  Quantity — Less    than    Freehold. 

8.  Estates  as  to  Quality  on  Condition — on  Limitation. 

9.  Estates  as  to  Quality — Mortgages. 
10.  Equital)le  Estates. 

n.  Estates  as  to  Time  of  Enjoyment — Futun*  Estates. 
12.  Estates  as  to  Xuniber  of  Owners — .luinl   Estates. 
1.3.   Ineorporeal   lie  rcilitainciits. 

14.  Legal  Cajiacity  to  Hold  and  Convey  Keaity. 

15.  Kestraints  on  .Mien.ition. 
]>;.  Title. 


Cll.V.'.)   i.s 


^\u}l}C5  on  Ctbmiralty. 

11)01.     504  pages.     )?3.75  dolivered. 
By  ROBERT  M.  HUGHES,  M.  A. 


TABLE    OF    CONTENTS. 

The  Origin  and  History  of  the  Admiralty,  and  its  Extent  in  the 
United  States. 

Admiralty  Jurisdiction  as  Governed  by  the  Subject-Matter. 

(General  Averajre  and  Marine  Insurance. 

Bottomry  and  Respondentia  ;  and  Liens  for  Supplies,  Repairs,  and 
Other  Necessaries. 

Stevedores'  Contracts,  Canal  Tolls,  and  Towage  Contracts 

Salvage. 

Contracts  of  Affreightment  and  Charter  Parties. 

Water  Carriage  as  Affected  by  the  liarter  Act  of  February  13,  1S93. 

Admiralty  Jurisdiction  in  Matters  of  Tort. 

The  Right  of  Action  in  Admiralty  for  Injuries  Resulting  Fatally. 

Torts  to  the  Property,  and  Herein  of  Collision. 

The  Steering  and  Sailing  Rules. 

lUiIes  as  to  Narrow  Channels,  Special  Circumstances,  and  General 
Precautions. 

Damages  in  Collision  Cases. 

Vessel  Ownership  Independent  of  the  Limited  Liability  Act. 

Rights  and  Liabilities  of  Owners  as  Affected  by  the  Limited  Lia- 
bility Act.  ^ 

The  Relative  Priorities  of  Maritime  Claims. 

A  Summary  of  Pleading  and  Practice. 

APPENDIX. 

1.  The  -Mariner's  Compass. 

2.  Statutes  Regulating  Navigation,  Including: 

(1)  The  International  Rules. 

(2)  The  Rules  for  Coast  and  Connecting  Inland  Waters. 

(3)  The  Dividing  Lines  between  the  High  Seas  and  Coast  Wa- 

ters. 

(4)  The  Lake  Rules. 

(5)  The  Mississippi  Valley  Rules. 

(C.)  The  Act  of  yhn-ch  3.  IS!)'),  as  to  Obstructing  Channels. 

3.  The  Limited  Lhabifity  Acts.  Including: 

(1)  The  Act  of  March  3,  18.")1,  as  Amended. 

(2)  The  Act  of  June  2(5,  1884. 

4.  Section  941,  Rev.  St.,  as  Amended,  Regulating  Bonding  of  Ves- 

sels. 
").  Statutes  Regulating  Evidence  in  the  Federal  Courts. 
0.  Suits  in  Forma  Pauperis. 
7.  The  Admiralty  Rules  of  Practice. 


C6559-19 


^ugt^es  on  5'-'<^*-'i*<-il 
3iU'i5btction  anb  Proccburc. 

1904.    G34  pages.    .$3.75  delivered. 

By  ROBERT  M.  HUGHES,  of  the  Norfolk  Bar, 

Author  of  "Hughes  on  Admiralty."  and  Lecturer  at  the  George 
Washington  Universitj-  Law  School. 


TABLE    OF   CONTENTS. 

Chap. 

1.  Introduction — What  it  Comprehends. 

2.  The  District  Court — Its  Criminal  Jurisdiction  and  Practice. 

3.  Same — Continued. 

4.  The    District    Court — Criminal     Jurisdiction — Miscellaneous 

Jurisdiction. 

5.  The  District  Court— Bankruptcy. 
6-8.  Same — Continued. 

9.  The  District  Court — Miscellaneous  Jurisdiction. 
10.  The  Circuit  Court — Original  Jurisdiction. 
11-12.  Same — Continued. 

13.  The  Circuit  Court — Jurisdiction  by  Removal. 
14-15.  Same — Continued. 

IG.  The  Circuit  Court— Jurisdiction  by  Removal — Original  Juris- 
diction of  tile  Supreme  Court — Other  Minor  Courts  of  Orig- 
inal Jurisdiction. 

17.  Procedure  in  the  Ordinary  Federal  Courts  of  Original  Juris- 

diction— Courts  of  Law. 

18.  Procedure  in  the  Ordinary  Federal  Courts  of  Origin.i!  Juris- 

diction— C'<jurt:!  of  E(iuity. 

19.  Same — Continuinl. 

20.  Appellate  Jurisdiction— The  Circuit  Court  of  Appeals. 

21.  Appellate  Jurisdiction— The  Supreme  Court. 

22.  Procedure  on  Error  and  Appeal. 

The  U.  S.  Supreme  Court  Rules  and  the  Rules  of  Practice  for  the 
Courts  of  Equity  of  the  l.'ulted  States  are  given  In  an  a|t|K'ndlx. 


<:i;.j.7.j-2ij 


3n(3crsoll  on  Public 

Corporations. 

1904.     738  pages.    $3.75  clelivorcd. 

By  HENRY  H.  INGERSOLL,  LL.  D., 

Deau  of  the  University  of  Tennessee  School  of  Law. 

TABLE    OF   CONTENTS. 

Part  1.— QUASI  CORPORATIONS. 

Chap 

1. 

Nature,  Creation,  Classification. 

2. 

Quasi  Corporations — Liabilities,  Elements,  Counties,  Property, 

etc. 

3. 

Same — Continued. 

4. 

Same — Continued. 

Part  2.— MUNICIPAL  CORPORxiTIONS. 

5. 

Municipal    Corporations. 

G. 

Their  Creation — How — By  What  Bodies— Subject  to  What  Re- 

strictions, etc. 

7. 

Their  Alteration  and  Dissolution. 

8. 

The  Charter. 

9. 

Legislative  Control. 

l(t. 

Proceedings  and  Ordinances. 

11. 

Ollicers,  Agents,  and  Employes. 

V2. 

Contracts. 

v.). 

Improvements. 

14. 

I'olice  I'owers  and  Regulations. 

1.',. 

Streets,  Sewers,  I'arks,  and  Public  Buildings. 

1!!. 

Torts. 

17. 

Debts,  Funds,  Expenses,  and  Administration. 

18. 

Taxation. 

19. 

Actions. 

Part  3.— QUASI  PUBLIC  CORPORATIONS. 

20. 

Quasi  Public  Corporations. 

21. 

Railroads. 

22 

Electric  Companies. 

O'J 

Water  and  (ias  Companies. 

24. 

Other  Quasi  Public  Corporations. 

Ct)559-21 


3aggarb  on  Coi-ts. 

1895.    2  vols.    1307  pages.    $7.50  delivered. 

By  EDWIN  A.  JAGGARD,  A.  M.,  LL.  B., 

Professor  of  the  Law  of  Torts  in  Minnesota  University  Law  Scliool. 


TABLE    OF   CONTENTS. 

Tart  1.— IN  GENERAL 

Chap. 

1.  General  Nature  of  Torts. 

2.  Variations  in  the  Normal  Right  to  Sue. 

3.  Liability  for  Torts  Committed  by  or  with  Others. 

4.  Discharge  and  Limitation  of  Liability  for  Torts. 

5.  Remedies. 

Part  2.— SPECIFIC  WRONGS. 

6.  Wrongs  Affecting  Safety  and  Freedom  of  Persons. 

7.  Injuries  in  Family  Relations. 

8.  Wrongs  Affecting  Reputation. 

9.  Malicious  Wrongs. 

10.  Wrcjugs  to  Possession  and  Property. 

11.  Nuisance. 

12.  Negligence. 

13.  Master  and  Servant. 

14.  Common  Canicrs. 


ci,:.:.;)  sj. 


IlIcKcbcy  on  (Sribcnce. 

1007.     540  pa^'os.     .«;:5.To  ilolivercd. 

By  JOHN  JAY  McKELVEY,  A.  M.,  LL.  B., 

Author  of  '•Common-Law  Pleading,"  etc. 

Second  Edition. 


TABLE   OF   CONTENTS. 
Chap. 

1.  Introductory. 

2.  Judicial  Notice. 

3.  Questions  of  Law  and  Questions  of  Fact. 

4.  Burden  of  Proof. 

5.  Presumptions. 

6.  Admissions. 

7.  Confessions. 

S.  Matters  Excluded  as  Unimportant,  or  as  Misleading,  though 
Logically  Relevant. 

9.  Character. 

10.  Opinion  Evidence. 

11.  Hearsay. 

12.  Witnesses. 

13.  Examination  of  Witnesses. 

14.  Writings. 

1.5.  Demurrers  to  Evidence. 

C6559-23 


Hortoit  on  ^ills  anb  Holes. 

1900.     GOO  pages.     $3.75  delivered. 

By  PROF.  CHARLES  P.  NORTON. 
Third   Edition:    By   Francis   B.   Tiffany. 


TABLE    OF    CONTENTS. 
Chap. 

1.  Of  Negotiability  so  far  as  it  Relates  to  Bills  and  Notes. 

2.  Of  Negotiable  Bills  and  Notes,  and  their  Formal  and  Essen- 

tial  Requisites. 

3.  Acceptance  of  Bills  of  Exchange. 

4.  Indorsement. 

5.  Of  the  Nature  of  the  Liabilities  of  the  Parties. 
G.  Transfer. 

7.  Defenses  as  against  Purcliaser  for  Value  without  Notice. 

8.  The  Purchaser  for  Value  without  Notice. 

9.  Of  Presentment  and  Notice  of  Dishonor. 
10.  Checks. 

Appendix. 


(.:>]7j:,:)  lii 


5I?ipinan  on  (£oiniiToiv£atr> 

1895.     615  pages.  .$3.75  delivered. 

By  BENJAMIN  J.  SHIPMAN,  LL.  B. 
Second  Edition. 


TABLE    OF   CONTENTS. 

Chap. 

1.  Forms  of  Action. 

2.  Forms  of  Action. 

3.  The  Parties  to  Actions. 

4.  The  Proceedings  in  an  Action. 

5.  The  Declaration. 

G.  The  Production  of  the  Issue. 

7.  Materia Ity  in  Pleading. 

8.  Singleness  or  Unity  in  Pleading. 

9.  Certainty  in  Pleading. 

10.  Consistency  and  Simplicity  in  Pleading. 

11.  Directness  and  Brevity  in  Pleading. 

12.  Miscellaneous  Rules. 
Appendix. 


C(J55'J-2.j 


Sl^ipman  on  (Squitij 
Plcabtng;. 

1S97.     044  pages.     $3.75  delivered. 

By  BENJ.  J.  SHIPMAN,  LL.  B., 
Author  of  '•Shipmau's  Common-Law   Pleading." 


TABLE    OF   CONTENTS. 
Chap. 

1.  Equity  Pleading  in  General. 

2.  Parties. 

3.  Proceedings  in  an  Equitable  Suit. 

4.  Bills  in  Equity. 

5.  The  Disclaimer. 
G.  Demurrer. 

7.  The  Plea. 

8.  The  Answer. 

9.  The  Replication. 


L>;:,:,:>  ■^'■. 


Smitl/s  (SIcmcntary  £aw. 

189(1     307  pages.     l?:{.75  clelivorea. 

BY  WALTER  DENTON  SMITH, 

Instructor  in  the  Law  Department  nf  the  University  of  Michigan. 


TABLE    OF   CONTENTS. 

Chap. 

rart  1.— ELEMEXTAKY  JURISPRUDENCE. 

1.  Nature  of  Law  and  tho  Various  Systems. 

2.  Government  and  its  Functions. 

3.  Government  iu  the  United  States. 

4.  The  Unwritten  Law. 
.").   Equity. 

n.  Tile  Written  Law. 

7.  The  Authorities  and  their  Interpretation. 

5.  I'crsons  and  I'ersonal  Rights, 
it.  I'roi>erty. 

lU.  Classification  of  the  Law. 

Part  2.— THE  SUBSTANTIVE  LAW. 

11.  Constitutional  and  Administrative  Law. 

12.  Criminal  Law. 

13.  The  Law  of  Domestic  Relations. 

14.  Corporeal  and  Incorjjoreal  Hereditaments. 
l."i.  Estates  in  Real  Pro^jerty. 

li).  Title  to  Real  Property. 

17.  Personal  Property. 

15.  Succession  After  Death. 
lt>.  Contracts. 

2(t.  Special  Contracts. 

21.  Agency. 

22.  Connnercial  Associations. 

23.  Torts. 

Part  3.— THE  ADJECTIVE  LAW. 

24.  Remedies. 

25.  Courts  and  their  Jurisdiction. 
20.  I'rocedure. 

27.  Trials. 


CO.j.jO-27 


(Etffanij  on  Ctgcncy. 

1903.     GOO  pages.     $3.7.j  delivertMl. 

By  FRANCIS  B.  TIFFANY, 

Author  of  "Death  by  Wrongful  Act,"  "'Law  of  Sales,"  etc. 


TABLE    OF    CONTENTS. 

Chap. 

Part  1.— IN  GENERAL. 

1.  Introductory — Definitions. 

2.  Creation  of  the  Relation  of  Principal  and  Agent — Appointment. 

3.  Same  (continue<;l)^Ratification. 

4.  What  Acts  Can  be   Done  by  Agent — Illegality — Capacity  of 

Parties— Joint  Principals  and  Agents, 
n.  Delegation  by  Agent — Subagents. 
G.  Termination  of  the  Relation. 

7.  Construction  of  Authority. 

Part  2.— RIGHTS  AND  LIABILITIES  BETWEEN  PRINCIPAL 
AND   THIRD    PERSON. 

8.  Liability  of  Principal  to  Third  Person — Contract. 

9.  Same  (continued). 

10.  Admissions  by  Agent — Notice  to  Agent. 

11.  Liability  of  Principal  to  Third  Person — Torts  and  Crimes. 

12.  Liability  of  Third  Person  to  Principal. 

Part  3.— RIGHTS  AND  LI.M'.ILITIES  BETWEEN  ACiENT  A.ND 
THIRD    PERSON. 

13.  Liability  of  Agent  to  Third  Person  (including  parties  to  con- 

tracts). 

14.  Liability  of  Tliird  Person  to  Agent. 

Part  4— RIGHTS  AND  LIABILITIES  BETWEEN   PKINCir.VE 
AND   AGENT. 

1.").  Duties  of  Agent  to  Principal. 
IG.  Duties  of  Princii)al  to  Agent. 
Ai)pendix. 


(Ciffanij  on  Persons  anb 
X)omc5iic  delations. 

1S9G.     r>,SO  pages.    $3.75  delivered. 
By  WALTER  C.  TIFFANY. 


TABLE    OF    CONTENTS. 


Chap. 

Part  1.— HUSBAND  AND  WIFE. 

1.  Marriage. 

2.  Persons  of  the  Spouses  as  Affected  by  Coverture. 
'S.  Kiglits  in  Property  as  affected  by  Coverture. 

4.  Contracts,  Conveyances,  etc.,  and  Quasi-Contractual  Obliga- 

tions. 

5.  Wife's  Equitable  and  Statutory  Separate  Estate. 
G.  Antonui>tial  and  Postnuptial  Settlements. 

7.  Separation  and  Divorce. 

Part  2.— PARENT  AND  CHILD. 

S.  Legitimacy,  Illogitimacy,  and  Adoption. 
!>.   Duties  and  Liabilities  of  Parents. 

10.  Rights  of  Parents  and  of  Children. 

Part  3.— GUARDIAN  AND  WARD. 

11.  rJuardians  Defined — Selection  and  Appointment. 

12.  Riglits.  Duties,  and  Liabilities  of  Guardians. 

13.  Termination  of  Guardianship — Enforcing  Guardian's  Liability. 

Part  4.— INFANTS,   PERSONS    NON    COMPOTES    MENTIS, 
AND   ALIENS. 

11.  Infants. 

l.'i.  Persons  Nou  Compotes  Mentis  and  Aliens. 

Part   n.— MASTER   .VND    SERVANT. 

10.  Creation  and  Termination  of  Relation. 


CG.jul)-29 


Ciffany  on  Saks, 

1908.     534  pages.     $3.75  dolivor<^cl. 

By  FRANCIS  B.  TIFFANY,  A.  B.,  LL.  B. 
(Harvard.) 

Author  of  "Tififany  on  Death  by  Wrongful  Act." 
Second  Edition. 


TABLE    OF    CONTENTS. 
Chap. 

1.  Formation  of  the  Contract. 

2.  Formation  of  the  Contract — Cnder  the  Statute  of  Frauds. 

3.  Effect  of  the  Contract  in  Passing  the  I'roperty— Sale  of  Spe 

ciflc  Goods. 

4.  Effect  of  the  Contract  in  Passing  the  I'roperty — Sale  of  Cood> 

not  Specific. 

5.  Fraud,  and  Retention  of  Possession. 

6.  Illegality. 

7.  Conditions  and  Warranties. 

8.  Performance. 

9.  Rights  of  Uni)aid  Seller  against  the  Coods. 
10.  Action  for  P>reach  of  the  Contract. 

Appendix:     Sales  Act — Eugilsli  Sale  of  (ioods  Act. 


Pancc  on  3n5urancc. 

ISUG.     GS3  pages.     $3.75  delivered. 

By  WILLIAM  REYNOLDS  VANCE, 
Professor  of  Law  in  tlie  Georce  Wasliiiigtou  University. 


The  principal  olvject  of  this  treatise  is  to  give  a  consistent  state- 
ment of  logically  developi^d  i)rinciples  that  underlie  all  contracts  of 
insurance,  with  subsidiary  chapters  treating  of  the  rules  peculiar 
to  the  several  different  kinds  of  insurance.  Special  attention  has 
lieen  eiven  to  the  construction  of  the  standard  fire  policy. 

This  treatment  will  help  to  bring  about,  we  believe,  the  much 
desired  clarification  of  this  branch  of  the  law. 

The  chapters  cover, — 
Historical  and  Introductory. 
Nature  and  Requisites  of  Contract. 
Parties. 

Insuralile  Interest. 
Making  the  Contract. 
The  Consideration. 

Consent  of  the  Parties — Concealment. 
Consent  of  the  Parties — Warranties. 
Agents  and  their  Powers. 
Waiver  and  Estoppel. 
The  Standard  Fire  Policy. 
Terms  of  the  Life  Policy. 
Marine  Insurance. 
.\ccident  Insurance. 

Guaranty,  Credit,  and  Liability  Insurance. 
Appendix. 


C0.3.J9-31 


/ 


LAW  LFBRARY 

tTKIVBRSITY  OF  CALIFORNIA 
I  OS  ANGELES 


UC  SOUTHERN  REGIONAL  LIBRARY  FACILITY 


AA    000  835  068    8 


9" 


^ 


